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.
