Get approved for a Bridging Loan

Bath is a very popular city with visitors who come to see the Roman Baths, the Royal Crescent, and other fascinating sites. The city is of significant architectural and cultural importance, resulting in it being listed as a UNESCO World Heritage Site.

With working from home becoming increasingly popular, people who only need to be in the office occasionally are happy to travel from Bath Spa to London Paddington by train, which only takes an hour and twenty-two minutes.

According to Zoopla, the average sold price for a property in Bath was £593,486, with a semi-detached property costing £602,000 and a flat £343,000. So, it could be viewed as more expensive than some of the surrounding areas in Somerset, Wiltshire and beyond, but the amenities, attractions and transport links are a huge draw.

 

Why short-term finance may be helpful for a property 

 

Quick bridging loans might be a consideration for people looking to purchase a property who have had their property chain broken. 

For example, the people who are buying your property are suddenly unable to complete the purchase, perhaps because the people buying their property have had a mortgage application declined. Rather than the vendors putting the property on the market again and you missing out on your dream home, you could take out a bridging loan to allow you to purchase the property you want.

A bridging lender will, subject to sufficient equity, lend enough money for you to complete the purchase of the new property while taking a legal charge on both the property you are purchasing and the property you are selling.

It’s important to understand that you must repay the bridging loan within 12 months. As a result, you will need to market your property at a realistic asking price to ensure the sale is completed within 12 months.

Another example might be a developer looking to buy a residential property to convert it to a home of multiple occupancy (HMO). An HMO is a property where at least three tenants live, representing more than one household, sharing toilet, bathroom, and kitchen facilities with other tenants.

 

How quickly can I get a Bridging Loan for a property?

 

While you may see the occasional report that someone has completed a bridging loan in 48 hours, the truth is that they usually take considerably longer to complete. Several factors determine the speed at which you can get a bridging loan to bridge the gap, including:

• Will the lender accept an automated valuation, or will they require an internal valuation where a valuer has to visit and inspect the property before coming up with a valuation figure? If a valuer needs to visit the property in person, it could add another two to three weeks to complete the application. Firstly, the valuer needs to book an appointment convenient to themself and the applicants. Once they have visited the property, they need to research to find properties that have sold of the same type, size, location, and condition as the property they have valued. This will enable them to value the property they have visited accurately. Finally, the report can be prepared, signed off, and sent to the lender.

• The lender you choose can significantly affect the time a bridging loan is completed. For an application to be completed in the quickest time possible, a lender would have to minimise the checks they carry out. For example, using an automated valuation report rather than a full internal inspection. While this could speed up the application, you are likely to be charged a higher interest rate by the lender to reflect the added risk. Take into account that if things like the roof are badly damaged, this may not come to light with an automated valuation.

• One potential delay is obtaining property searches. One is a local authority search that highlights any prospective planning restrictions or permissions. These searches can take up to six weeks or more to obtain. To avoid this delay, some lenders will allow solicitors to obtain a search indemnity policy, covering any loss due to adverse entries that would have otherwise been brought to light with a search.

• From the lender's point of view, the most critical factor is how you will repay the bridging loan. This is referred to as the “exit”. If you are selling your primary residence, the lender will want to see that you are marketing the property with a realistic asking price. If the property has not sold after, say, six months, the lender may want you to reassess the asking price to ensure that the property is sold and the bridging loan is repaid within 12 months. As a general rule, the quicker you need the bridging finance, the higher the interest rate and fees you will pay.

 

Whether you are looking we recommend seeking the services of a broker who fully understands the bridging market and has good contacts with many bridging loan lenders.

While not all bridging loans fall under Financial Conduct Authority (FCA) regulation, working with a broker regulated and authorised by the FCA would be beneficial.

 

 

How much does a bridging loan cost?

 

The cost of bridging loans varies from lender to lender. 

Standard bridging loans in Bath should be similar to bridging loans in most parts of the UK. Lender charges and bridging loan interest rates will be similar.

A lender who requests a minimal amount of items will likely charge a higher interest rate than a lender who asks many questions and has numerous requirements. A lower rate is currently around 0.65% per month, with higher rates of 1.49% per month or more (as of December 2023). The actual loan rate will vary depending on various factors, including the applicant's credit history and how much they want to borrow in relation to the value of the property or properties.

Lenders will also charge an arrangement fee, typically 2% of the amount borrowed; e.g. if you borrow £250,000, you will be charged a fee of £5,000.

Other fees should be considered, including solicitors / legal, valuation, and possible exit fees. A broker can provide you with a comprehensive illustration that should highlight the loan amount and all fees.

For more information about short-term or long-term secured loans, contact our team of experts today.