From learning the differences between first and second charge bridging loans to understanding how they compare to traditional mortgages, you’ll find it helpful to do some research before making an application.
Taking on a bridging loan is a big financial responsibility and there are lots of factors to take into consideration.
First and foremost, you need to determine if a bridging loan is the right funding option for you. The loan security, available equity, exit strategy and use of funds will be the main priority for lenders, and having these in place will help you navigate the process more smoothly.
A bridging loan is a form of short-term finance that requires you to use a property you own as security. It works in a similar way to a mortgage – although there are some key differences.
If you own a property that needs to be refurbished or is currently classed as inhabitable, a bridging loan may be a favourable option.
Bridging loans are divided into two categories: first charge and second charge.
The ‘charge’ element refers to the security being used against the loan, which will be a property you own.
If you are unable to repay the loan in full, the lender would have the right to take possession of the property and sell it to recoup their money. This is usually a last resort, but it remains an option.
This is for borrowers that own the property outright (if you have paid off the mortgage, for example). It effectively means the lender will take a ‘first charge’ over the property in the event of a repossession, so it will get paid first.
If you haven’t paid off the mortgage on the security property and owe money to another lender for it, the bridge loan provider will give you a ‘second charge’ loan. So, in the event of a repossession, the bridging lender would be paid only after the mortgage debt has been settled.
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The main differences between bridging loans are mortgages are:
If you’re not sure whether a mortgage or bridging loan is the best option for your situation, speak with the Willows team who will be more than happy to help.
There is no universal answer to this question, as it all depends on your individual circumstances. In some cases, a bridging loan may the only viable option available to a borrower for:
If you have more time, the property is in a habitable condition, and you have provable income, looking at secured loans or traditional mortgages may be a better option.
Bridging lenders often work with lower loan-to-value (LTV) ratios than traditional mortgage providers. This means you will need a larger deposit or more equity in the property. For example:
However, bridging loan lenders can offer greater flexibility in other areas:
There may be instances where you can secure a LTV ratio that is higher than 75%, but this will depend on several factors (available equity, credit checks etc.) and offered at the lender’s discretion.
Having a strong exit strategy is the cornerstone of any bridging loan application, so before you apply, take time to think of how you would repay the funds.
Lenders place less emphasis on your credit history and income, so if you are certain that you have a solid plan in place to repay the loan, and you meet the rest of the criteria, you could stand a good chance of being approved.
The Willows bridging broker team is here to help you manage your bridging loan journey, using our expertise to offer in-depth support and find the best deals around.
Call us on 01656 766 158 and let us know what we can do to help
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At Willows Finance Ltd, we appreciate that your privacy is extremely important to you. With this in mind, we have put in place a number of measures to ensure that any personal details we obtain from you as a result of visiting this website is processed and maintained in accordance with accepted principles of good information handling and also in accordance with the Data Protection Act 1988.
This statement provides you with details of the type of information we may hold about you, how we obtain and use information and how we protect your privacy.
Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Authorised and regulated by the Financial Conduct Authority
Firm Reference Number: 670052
Company Number: 6678545 (Registered in England and Wales)
This document outlines the services we provide. If you need clarification, please contact us at 01656 766158.
We offer first and second charge regulated mortgage contracts for business or personal use.
Other finance options may include:
Regulatory Status:
We offer an advised mortgage broking service and provide enough information for you to make an informed decision.
We are not independent financial advisers. Free debt advice is available from the Money Advice Service.
You can view our privacy policy at: https://willowsfinance.co.uk/privacy-cookie-policy/.
Lenders may also have their own privacy policies which will be provided to you.
We charge a broker fee upon loan completion. The average fee is approximately 5%, depending on your situation.
Fee details:
No refund is offered after completion. You may pay upfront or add the fee to your mortgage. Fees and commission will be detailed in your ESIS and Mortgage Agreement.
You will receive a Mortgage Agreement and an ESIS document detailing:
You may cancel your application anytime before completion without any charge. Mortgages cannot be cancelled after completion.
Missing payments can lead to charges, repossession, and negative impacts on your credit rating.
Consolidating debt may result in higher long-term interest. Securing debt against your home increases risk.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.
If you wish to complain, contact us at:
Willows Finance Limited
Brocastle, Bridgend, CF35 5AS
Tel: 01656 766158
You may be able to refer your complaint to the Financial Ombudsman Service.
We are covered by the FSCS. You may be eligible for compensation of up to £85,000 per person per firm for mortgage advice and arranging.
More info: www.fscs.org.uk
After processing your application, you’ll receive a Mortgage Agreement and have a 7-day reflection period.
Contact us during this period with any questions. To proceed, sign and return the agreement.
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