An Essential Guide to Bridge Loans for Beginners

by VP Capital Lending Real Estate Investment

Bridging loans are one of the flexible and convenient options for short-term finance that is a great help for the property investors to fund their projects, so bridge loans for real estate are quite popular.

A bridge loan can be used for multiple purposes, like whether you want to purchase property, fund the right refurbishments or use it for profits.

This article will enlighten you with different essential factors about bridging loans.

Are bridging loans regulated?

Bridging loans are both regulated and unregulated. If the security property is obtained by the borrower, then the loan will be regulated, and this kind of regulated bridging loan is applicable to both homeowners and gives support to quick acquisition before selling their current property.

On the other hand, unregulated bridging loans are relevant to those borrowers who will not occupy the security property and is opted for business motives. There are many common types of bridging loans and they are convenient options for the property investors to get land, properties or to fund their works.

In this piece of writing, our emphasis will be on unregulated bridging loans.

For what purposes a bridging loan can be used?

As mentioned above the bridging loans can be used for a myriad of purposes.

The more common purposes are mentioned below:

Capital raises for future projects
Buying a property at auction
To secure a commercial, residential site for the upcoming works or developments.
To refinance completed development projects onto cheaper funding as you sell them.

How do you get a bridging loan?

Bridging loans are not provided by high-street banks, meaning you need to approach specialist lenders. Depending on the lender, you can enquire through your broker or approach directly; some of the lenders may support you to do both.

From there, the process acts like any other mortgage application, with the valuation process and underwriting, and the legal procedure.

Is it a very long term process to get bridge loans?

Bridging deals can be accomplished very quickly as compared to traditional mortgages. In case the deal is simplified, then it may take three days.

How much can be borrowed on a bridging loan?

The lenders set the loan amount, but the most common loan amount in the UK is 15 million pounds; some may even go for the higher amounts as per the deal. The amount you can get depends upon the financial circumstances, a valuation report of the project, and credit history. There are different criteria to sanction loan amounts.

Can you get 100% bridging loans?

No. lenders want to mitigate the chances of the risk by rendering 100% bridging loans or commercial real estate loans. LTVs go as high as 75%. Your portfolio also determines a lot of things about the sanctioned loan amount.