No, you do not need to be living in the property you’re using the bridging loan on in order to get one. Bridging loans are a secured form of lending, meaning the lenders require a valuable asset/property to secure the loan. The security typically used for this is the property you’re wanting to purchase/use the loan on.
Your borrowing facility will be based on the potential value of the property, as well as other details of your application (e.g., credit checking and affordability). The borrowing facility is also based off of whether the lender would be able to recover the debts if having to repossess the property, however, repossession of the property is usually only used as a last resort when the borrower defaults on their bridging loan.
Can I Take Out a Bridging Loan Without Security?
You cannot take out a bridging loan without security. Bridging loans are a type of secured lending, which requires a valuable asset as collateral in the event that the borrower cannot repay their loan.
While you can’t take out a bridging loan without security, there are a number of other loan options available where you don’t need to secure something to be approved for the loan.
An unsecured loan, as the name suggests, can be taken out without security, the lenders looking instead at other details of the prospective borrower’s application, including their credit history.
With an unsecured loan, you’ll also find the maximum amount you can borrow is significantly smaller than with a bridging loan – unsecured loans commonly offering up to £25,000, whereas bridging loans with Octagon Capital start at £50,000.
When looking to borrow money, it’s important to understand the lenders requirements as well as your own borrowing needs, and to explore loans you’re eligible for that can also accommodate to your circumstances.
Will I Need a Survey?
Yes, a bridging loan will be subject to a survey, helping the lender to ensure that the loan is safe to proceed with and isn’t too high of a risk.
As part of the survey process, a qualified surveyor will be sent to the property that is to be secured on the bridging loan. This surveyor will inspect the property for its value and provide a valuation once the inspection is complete.
Homeowners can often overvalue the property, which is why it’s important to get a valuation from someone qualified in assessing the true value of the property.
What’s the Eligibility Criteria?
The eligibility criteria for bridging loans through Octagon Capital is as follows:
- Must be over 18
- Must have an exit strategy in place
- Property is subject to a valuation
- Must be a minimum borrowing amount of £50,000
- Bad credit considered
- Available in U.K., Scotland, and Wales
- Commercial, residential, mixed properties and HMOs considered
Bridging loan lenders are interested in how much value your property could potentially have, as well as your plans for it. Having a clear and concise exit strategy and plan of action will help you in getting your application approved.
Can I Take Out a Second Charge Bridging Loan?
Yes, you can take out a second charge bridging loan, however the lenders of second charge loans will typically need to get permission from the first charge lender for the loan to go ahead.
Bridging loan lenders will always add a “charge” to the property that’s being used as security, which establishes a priority of debts if the borrower becomes unable to repay their loan.
If it comes to the property being repossessed, the first charge lender would be paid first, then following this would be the second charge lender.
What Happens if I Can’t Repay My Bridging Loan?
If you can’t repay your bridging loan you should contact your provider right away and explain your situation. Often, your lender will work with you to try and come up with a manageable solution. It’s only usually as a last resort that your property will be repossessed.
