How quickly can I get a bridging loan?

How quickly can I get a bridging loan?

If you’re eyeing a property purchase or need to cover a funding gap, a bridging loan may be a smart option. This type of loan is designed for speed and flexibility, making it ideal for those urgent financial needs. But just how quickly can you get a bridging loan? The answer can vary greatly, influenced by several factors that we’ll explore in this detailed guide.

Bridging loans are short-term funding solutions primarily used in real estate transactions. They ‘bridge’ the financial gap between buying a new property and selling your current one. Understanding the process and what affects the speed of approval will help you plan effectively.

Understanding Bridging Loans and Their Uses

Bridging loans are unique financial tools. They offer short-term funding, typically from 1 to 12 months. People use them mainly for property-related transactions but also for urgent business needs or other substantial expenses.

These loans are quicker to arrange than traditional mortgages due to less stringent underwriting processes. However, the speed can depend on how well you meet the lender’s requirements and the complexity of your financial situation. In addition, some lenders are faster than others simply because they are geared up that way

Common uses of bridging loans include buying a new home before selling your current one, buying property at auction, or funding urgent business investments. These scenarios often require quick financial decisions and actions, making bridging loans ideal.

Factors Influencing the Speed of Getting a Bridging Loan

Several key factors can affect how quickly you can secure a bridging loan.

What is the type of property?

Does it need a full valuation or will an automated valuation be sufficient? The type of property and loan purpose dicates the rates, lenders and therefore speed. Find out about different types of bridging loans here.

What is the level of borrowing compared to the value?

A higher LTV is risky for the lender so they may carry out additional checks and more stringent valuation.

Is the loan regulated?

A regulated loan is normally secured on the borrowers main residential property. It is also for personal use rather than for business use. Because it is regulated, there is greater Consumer Protection. This means that brokers and lenders have to jump through additional hoops which can slow the process down. In addition, compared to the whole market, there are very few regulated bridging lenders. This reduces your choice and can lead to a slower process.

Are there any legal complications? 

Are all the planning consents and building regulations in place? Has the property been recently purchased or transferred? Land registry can take approaching a year to deal with the paperwork.

Are there any works involved?

A more detailed valuation might be required to confirm the cost of the works and the value of the property once completed

Is the borrow using a decent solicitor with experience of bridging finance and a sense of urgency?

Most high street solicitors lack experience in bridging. They also are often incapable of working at the pace required if you are looking for a fast completion. Always ask your broker if they can recommend somebody. It’s usually better to pay a little bit more to get the job done properly. Often a specialist bridging solicitor costs no more because they do the job in less time.

Is there anything about the property which might trip us up later?

Especially on commercial property – asbestos reports, fire safety reports, structural issues, rights of access etc

Is there a strong exit in place?

This could be sale of the property or refinance. The lender will want to see evidence that this is realistic before completing the loan.

What’s about the borrowers profile?

Do they have a good credit history? Do they have experience in this type of transaction? The more complicated the transaction, the more experience lenders may be looking for.

Does the lender have a process built for speed?

Many bridging lenders are subsidiaries of Banks. Whilst they try to offer a fast and efficient service, volumes of business and attitude can get in the way. Sometimes a smaller lender with a Can-Do attitude can get the job done a lot faster.

Also, some lenders will accept a form of indemnity insurance which reduces the requirement on legal searches. Others will instruct the legal process at the start before the valuation has been done. Solicitors are often the slowest part of the process so this can save vital time.

What is the best case scenario for a fast completion?

For smaller loan amounts at a low loan to value, you can potentially avoid needing a valuation, cut out solicitors and use a lender which is totally focused on speed. It may cost you a little more that could be a price worth paying if timing is important.

Steps to Getting a Bridging Loan Quickly

To expedite your bridging loan, start by gathering all required documents. You’ll need proof of income, identity documents, details of the property involved, and a clear exit strategy. Having these ready can significantly speed up the process.

If you are carrying out improvements the property, prepare a full schedule of the proposed works and associated costs. Also have an idea of what the property will be worth when completed.

Next, choose a specialist broker. They can guide you to the right lenders who are known for quick processing times. Brokers also help with paperwork and can negotiate terms on your behalf, streamlining the process.

Finally, be ready for valuation and legal checks. Lenders may arrange property valuations to confirm the market value and legal checks to ensure there are no issues with the property. Being prepared for these steps can avoid delays.

Typical Timeframes for Bridging Loan Approval

The timeline for obtaining a bridging loan can vary, but typically, you can expect it to take anywhere from a few days to a few weeks. For straightforward cases, with all documents in order and no property issues, loans can be approved within days.

However, more complex situations, such as properties with legal issues or borrowers with unusual financial circumstances, may take longer. It’s wise to allow a couple of weeks for the entire process, especially if you are new to bridging loans.

Working with experienced professionals and choosing lenders known for their efficiency can help ensure you get your funds as quickly as possible.

People Also Asked

What are the risks of taking a bridging loan?

Bridging loans are higher in interest than traditional loans and require a clear repayment strategy. Without a solid exit plan, there’s a risk of financial strain.

Can I get a bridging loan with bad credit?

Yes, it’s possible. Bridging loans depend more on the property and your exit strategy than just your credit score. However, better credit can secure more favorable terms.

What is the maximum loan-to-value ratio for a bridging loan?

Most lenders offer up to 70-75% LTV. Some may go higher if additional security is provided or if works are being carried out which will increase the property value.

Are there alternatives to bridging loans?

Alternatives include traditional loans, personal loans, or waiting until your current property sells. Each has its pros and cons depending on your situation.

How do I find the best bridging loan rates?

Compare lenders or use a specialist broker. They can provide access to competitive rates and terms suited to your financial needs.