Dan Kettle

Can I Get a Bridging Loan on My House?

Yes, you can get a bridging loan on your current house. Most bridging loan providers will require property as security on the loan. They accept a range of different properties for this purpose, including residential, commercial, semi-commercial and land.

Bridging Loans are a great option to consider when in between a property sale and a property purchase, used to “bridge” the financial gap and help you move into a new property before selling your existing one.

These types of loans should only ever be used as a means of short-term finance, as if it takes a while to sell your current property, or the sale falls through completely, you could then be stuck with a substantial amount of secured debt.

Here, we’ll take your through the key features of bridging loans, including who they’re really for, eligibility criteria, the cost of the loan and more.

Who Are Bridging Loans For?

Bridging loans are a dynamic means of finance, and can be used effectively in a range of different situations, including the following:

• Moving house
• Property development projects
• Raising Finance

When applying for a bridging loan, you’ll also have to meet the lender’s eligibility criteria. Some lenders will require applicants to have a good credit history, however others may be willing to consider those with adverse credit histories.

What’s the Criteria for a Bridging Loan?

Octagon Capital’s eligibility criteria includes:

• Must be over 18
• Available for residential, commercial, mixed properties and HMOs.
• Must have an exit strategy
• Available in U.K., Scotland and Wales
• Minimum borrowing amount of £50,000

We can also offer non status bridging loans, meaning we can consider those with no proof of income and adverse credit histories. With these types of loans, we’ll be interested in the value your property could potentially have, and your plans for it. For these types of loans, you can help to build up your application with a plan of action, an exit strategy and an indication of costs.

What Can I Use a Bridging Loan For?

A bridging loan can be used for various different purposes…

When moving house, homeowners might want to purchase a new property before selling their existing one, worried that they’ll lose their new property by waiting too long on the sale of their current home. Bridging loans can be useful for these types of situations, giving homeowners access to the money they need so that they can purchase their new property before selling the old one. The loan is then repaid when the old property is sold.

Bridging loans can also be great for property development projects. If a property developer wants to refurbish a property to sell at a higher price, they can take out hundreds of thousands, or even millions of pounds via a bridging loan for this, with money able to be sent through quickly and efficiently.

Those wanting to raise finance for investment opportunities can also do this with the help of a bridging loan. For those already with one of these loans, or a mortgage, this is known as a first charge. You can then take out another one of these loans (known as a second charge) using any leftover equity you have.

How Much Do They Cost?

As bridging loans are only meant to be used for a short period of time, they’re priced monthly instead of annually. With this type of loan, you may find yourself facing monthly fees between 0.5% and 1.5%.

The precise fees will be dependent upon the property and the opportunity it offers, however, the typical fees you’ll see with a bridging loan include:

• Arrangement fee
• Interest rate
• Legal fees
• Valuation fees
• Broker fees
• Exit fees

Interest will be charged for each month the loan is open for. Borrowers can either decide to pay this back month-on-month, or also have the option to “roll up” these repayments, leaving this until the loan term end.

How Do I Get a Bridging Loan?

You can apply for a bridging loan with Octagon Capital. First, you’ll have to make an initial enquiry, either via the form on this page, sending an email to sales@octagoncapital.co.uk, or by calling us on 0333 414 1491.

Through this enquiry, you can tell us how much you need to borrow and for how long, as well as some details on the property in question, including your plans for it. During this discussion, we’ll be able to advise you on the next steps, and you could receive an Offer in Principle in a matter of hours.

by Dan Kettle

Can I Get a Bridging Loan if I Am Self-Employed?

Yes, if you’re self-employed it’s possible for you to get a bridging loan. With more than 5 million people self-employed in the U.K., many of which have borrowing needs, for lenders it makes sense to accommodate to this group.

The affordability rules for bridging loans aren’t as strict as they are for mortgages, however, self-employed people applying for a bridging loan will have to prove their financial status with business accounts, as well as meeting other eligibility criteria in order to be approved for this type of loan.

Should I Get a Bridging Loan if I’m Self-Employed?

Bridging loans can be a great method of borrowing for those who are self-employed, useful for a variety of different funding requirements.

For example, if you’re self-employed and investing in redeveloping a property that was bought at auction and need to borrow a loan to help purchase the property within the allotted 28-day period.

Mortgages may take too long to be approved in time for this, whereas a bridging loan can come through in time to meet the purchase deadline. The bridging loan is then repaid once it’s “bridged” the financial gap.

Bridging loans are a short-term type of finance, and therefore not intended for long-term use, but rather for temporary issues with cash flow.

Will I Need Proof of Income for a Bridging Loan?

For self-employed applicants, lenders will typically need to see proof of financial status. This can be shown through business accounts, typically over the course of two years, however certain lenders may only need to review one year of such accounts if one year is all that’s available.

In addition to this, the lender might request to see copies of the applicant’s bank statements.

With bridging loans, lenders will be focused more so on the applicant’s exit strategy rather than their financial status. This exit strategy can therefore be more important for a self-employed person’s application than their income.

So long as the applicant meets all the necessary eligibility criteria, even when self-employed, they could be eligible for a bridging loan.

What’s the Eligibility Criteria?

Eligibility criteria for a bridging loan can include:

• Minimum borrowing amount of £50,000
• Available in U.K., Scotland and Wales
• Must be over 18
• Available for residential, commercial, mixed properties and HMOs
• Must have an exit strategy

When borrowing money in any form, a general requirement that can be expected is for the applicant to have a good credit score. However, with bridging finance this isn’t always the case.

At Octagon Capital, we’re willing to take a view on applicants with adverse credit histories, and also those with no proof of income. These types of bridging loans are often referred to as “non status bridging loans” and offer flexibility for those who have struggled to access finance before for these very reasons.

How Much Does a Bridging Loan Cost?

With bridging loans, you can expect to see typical monthly fees of anything from 0.5% to 1.5%.

Bridging loans are priced monthly rather than annually, due to the fact that they’re only intended for temporary, short-term use.

The typical fees you could see when borrowing a bridging loan include the following:

• Interest rate
• Legal fees
• Valuation fees
• Arrangement fee
• Broker fees
• Exit fees

The exact fees will depend on your unique case – e.g., the property and the opportunity offered with it.

You can choose to pay the interest each month (the interest being charged per month), or “roll up” the repayments and pay the full amount due at the end of the loan term.

The precise details regarding the cost of your loan and the fees charged will vary depending on the lender you go with, your circumstances and therefore the application you submit.

Where Can I Get a Bridging Loan When Self-Employed

Start your bridging loan application today with Octagon Capital. Simply make an initial enquiry via the form on this page, send an email to sales@octagoncapital.co.uk, or call us on 0333 414 1491.

We offer non status bridging loans and are willing to consider those with no proof of income as well as those with adverse credit histories.

by Dan Kettle

Can I Get a Bridging Loan Without Security?

No, you cannot get an unsecured bridging loan. This type of finance is always provided on a secured basis, meaning you will need to have the appropriate asset to secure the loan.

The asset required can vary depending on the lender, your project, and the details of your application, which we’ll go into more detail about later on in this guide.

What Unsecured Bridging Loan Alternatives Are Available?

You can take out an unsecured loan, which does not require a valuable asset to be secured. If you’re unable to take out a secured loan due to a lack of property/asset, this type of finance may be a better option to consider.

You may be able to take out an unsecured loan over a short period of time. These types of loans can be arranged quickly, however, can have high interest rates.

With an unsecured loan, lenders may also rely on other details of your application to feel secure in who they’re lending to, such as the applicant’s credit score.

There’s a wide range of different loans available on the market that won’t require a valuable asset as security, catering to a range of different circumstances, borrowing amounts and periods. It’s important to understand exactly what you’re looking for in a loan, and what details you’d need accommodating for (e.g., an adverse credit history), to help you filter your search for the best loan without security.

Secured vs Unsecured Lending

Both types of loans have their own pros and cons, and the best fit for borrowers will be dependent upon their unique circumstances and requirements.

With a secured loan, borrowers may be able to borrow significantly larger amounts in comparison to personal, unsecured loans. Borrowing amounts for unsecured loans typically go up to around £25,000, whereas with Octagon Capital, the minimum amount you can apply for with a bridging loan is £50,000.

An unsecured loan will also often require applicants to hold a good credit score, helping to provide reassurance that they can keep up with repayments. It’s for this reason that secured loans can be seen as more accessible to those with adverse credit histories (provided you have a valuable asset to secure the loan with), available for those that don’t hold a perfect credit history with the property, reassuring the lender that the loan will be paid off.

However, by securing valuable assets like your home onto a loan, you could end up losing it if you can’t pay back the loan. This can be a big risk to take, so it’s important to only take out such a loan when you’re confident that you’ll be able to keep up with repayments.

Should I Consider a Secured Bridging Loan?

If you’ve got a valuable asset to secure on the loan and are confident that you’ll be able to pay it back in time, a secured bridging loan is worth considering.

A bridging loan can be used for a variety of different purposes, including the following:

• To help you buy a new house
• To help fund a property development project
• To help raise finance

When in between the sale of your current house and the purchase of a new one, bridging finance can help “bridge” the gap between the two, lending you the funds to purchase the new property before the existing one has been sold. This can be great for those who are at risk of losing their dream home waiting around for their current property sale to go through.

Bridging loans can also be used to help fund property development projects. If a property developer wants to refurbish a property or block of flats to sell them for a higher price, they can help fund this via a bridging loan.

You can also use a bridging loan to raise finance for investment opportunities, for example, putting money into another property or a business. For those with an existing bridging loan or a mortgage (a first charge) with any equity left over, you can use this to take out another loan (a second charge), for such opportunities.

Am I Eligible for a Secured Bridging Loan on an Unmortgageable Property?

Yes, you can still be eligible for a bridging loan even if you’ve been refused by a mortgage lender.

The term “unmortgageable” is used for properties that mortgage lenders refuse to touch. This can be due to the lack of a kitchen, bathroom or for various other reasons.

Even if a property is unmortgageable, you may still be eligible for a bridging loan, and even use the funds from this loan to make the property habitable, and therefore able to later sell at a profit.

If you’re unsure about whether a bridging loan is right for you, get in touch with Octagon Capital to discuss your options.

by Dan Kettle

The Regulations You Need to Be Aware of When Buying a New Home

Buying a home is both exciting and terrifying at the same time. It is a process that can throw surprises at you along the way, that can become increasingly expensive the more you dig and yet can leave you residing in your dream property when it concludes.

There are few regulations placed upon you as a buyer, but there are aspects of owning a home you should be aware of before you decide to purchase, especially if you are buying an older home. If you are purchasing a new build, then there is less likelihood of complications from a survey, although you should still have certain criteria satisfied.

Energy Performance Certificate (EPC)

The main regulation you should find useful is the Energy Performance Certificate, known as the EPC, which is mandatory for homes when they are built, sold or let. It covers aspects of thermal efficiency and gives your home a rating from A to G – A being the most efficient and thus likely to cost you less in energy bills. Now more than ever before, insulating your home is an important business, a topic we explore in our article Why is Property Insulation so Important?

Survey-Dependent Regulations

As Property Industry Eye discusses, there is a drive to reintroduce a compulsory pack for home sellers, like the defunct Home Information Pack. It was a short-lived method by which a seller put together a pack of information about their home prior to it going on the market, much like a survey but conducted before a buyer had been found. They were compulsory until May 2010, but a similar project has yet to become mandatory in the UK. That means in terms of regulations, the only other ones you need to be aware of are directly affected by your survey, usually conducted by your mortgage company ahead of any purchase.

These cannot be avoided, and they are intended to give your lender a clear picture of the property they are lending money against. These could throw up all manner of problems which need resolving before you are loaned money, or that you must pay attention to in the first six months of moving in.

Typically, older homes tend to fall foul of surveys, with electrics and damp being two of the key areas which you may have to look to carry out remedial work on. Electricity can be dangerous and in older homes, particularly those that have been advertised as ‘in need of modernisation’, you may have to have a full rewire carried out. Even if you only need certain parts of the system looked at, the NICEIC regulations are far-reaching and demand a qualified contractor to work on the property. Failed wiring, fuse box breakdowns, or even broken power sockets are all serious problems facing homeowners at any time, but in a new property you may not be aware of previous problems or potential ones.

However, HomeServe outlines how with electrical insurance cover you can protect yourself from any unforeseen dangers, and against the cost of expensive repairs in the event of breakdown or malfunction. It is especially important to pay attention to this aspect of your home not only when you move in, but in the months after the purchase. It is somewhat ironic that if you bought a faulty TV and the problem became apparent a week after you purchased it, you could return it, but you are afforded no such protection with your home.

If you are asked to carry out work that involves your gas supply, you will also need to consult a qualified engineered, one who is CORGI registered. This is less likely on a survey but is still something you should consider. Regulations around the following are not as stringent, and there is flexibility for you as the purchaser:

• Plumbers
• Decorators
• Bricklayers

However, being cautious is still advisable even if the project does not demand a specific qualification, as electrics and gas do.

In terms of regulations that cover what you need to be aware of, the randomness of the survey is something to keep an eye out for. Some properties may have asbestos that needs removing, others may have bats in the loft – both of which are covered by certain regulations. If you are in any doubt, make sure you opt for a more expensive and thorough survey, as it is usually an option, and carefully pour over the recommendations and suggestions contained within.

This way, you can enjoy your new home not only when you move in, but for many years to come.

by Dan Kettle

How to Keep Building Sites Safe During Covid-19

The construction industry continues to boom during the pandemic. Following a quiet lockdown period from March to May, there has been a real eagerness to complete on properties and carry out renovations, making the most of the stamp duty cuts and trying to capitalise before another pandemic or lockdown emerges.

The property market continues to very busy, with a record number of mortgage approvals and applications for construction finance.

But with construction booming across the UK capital and other regions, it is important that any construction workers are still minimising any risk of the covid-19 pandemic spreading, especially for their colleagues and any clients living or working in their homes. Octagon provides some advice for keeping build sites safe during covid-19.

Allow for Open Spaces

Construction sites are typically in the open air - and this is something that reduces the risk of covid-19 spreading. However, as a site comes closer to completion, the spaces become enclosed, especially if you have the client living in the home at the same time. In this case, you have to take measures to make sure that windows are always open and that the spaces are not confined. You can also consider making areas just for workers or builders and not accessible for household members.

Hand Washing Stations

Using hand sanitisers or hand washing stations are important to avoid the germs and virus spreading. If you are bringing materials from different locations, you want to ensure that your hands are clean (or you are wearing gloves) and they are washed every time you leave and enter.

Some construction sites will already have hand washing stations, assuming there is a kitchen installed.

You can also access portal hand washing stations from the likes of Trovex, which are perfect for construction sites upon entry or exit - and they have also been used by schools and other places of interest.

Regular Testing

It is not unreasonable to ask for and carry out regular covid-19 testing on builders and workers, especially if they are mixing households or working on multiple jobs. The result of one person or the entire team catching covid-19 could be detrimental to the workflow, deadline and become very costly.

Home testing kits for Covid-19 are available to order online and cost just a few pounds. But ideally you should try find the ones available in bulk so that you can carry out tests daily and for multiple staff members.

Wearing Masks When in Close Proximity to Others

Wearing the correct PPE is always important if you are not in the same bubbles. So if you have different specialists and builders coming in from different locations, the correct PPE such as masks and gloves will be important.

For the very least, you may need to wear masks and gloves or show that you are regularly washing your hands just to instil confidence in the client - and demonstrate that you are taking measures towards their safety and yours.

by Dan Kettle