How Much Can I Borrow with A Bridging Loan?

Are you in need of a short term financing solution that will give you access to funding quicker than more traditional methods such as a mortgage. If circumstances dictate and for the right type of borrower a bridging loan can often be an excellent short term solution for anyone who is looking for an injection of cash. 

 

Bridging loans are regularly used by people looking to solve issues around time sensitive property deals such as buying at auction, properties that don’t qualify for a traditional mortgage or if there is a gap in your finances when you are looking to either up or downsize. 

 

One question often asked about bridging loans is how much can I borrow. The answer to this question will be determined by a number of different factors and within this blog post we will try to provide you with the answers that you may be looking for. We will do this by looking at the factors that determine what you can borrow, if there is a difference between the amounts you can borrow for first and second choice bridging finance, and what the maximum and minimum amounts of bridging finance available are. 

 

What Factors Determine the Amount you Can Borrow When Taking out a Bridging Loan?

As we mentioned earlier there are a number of different things that will influence whether you can get bridging finance and the amount available to you. These include: 

 

The Lender: There are a lot of specialist lenders who offer bridging finance and each one will have different criteria when it comes to suitability for bridging finance. This is because there is no one size fits all solution where bridging loans are concerned. Every case will be judged on an individual basis by the lender taking into account things such as the validity of your exit strategy and what security you are offering. 

 

The number of lenders available to you can be confusing which is why we would advise you to use the services of a reputable broker when looking for bridging finance. Our Pyxis our team will look at your particular circumstances and put you in touch with the lender that best meets your specific needs. This can not only save you time but also help ensure you get the most favourable rate of interest. 

 

The Value of Your Assets: The value of the property you intend to use as security will have a direct affect on the amount of finance available to you. The more value in the assets you are using as security then the greater the amount the lender is likely to offer you. 

 

Loan to Value Ratio (LTV): The loan-to-value (LTV) ratio is an important metric in determining the amount a borrower can obtain through a bridging loan. Lenders use this ratio to evaluate the loan’s risk by indicating the percentage of a property’s market value they are willing to finance. Maximum loan to ratio value is generally around 75% however some lenders will allow a higher percentage LTV ratio. 

 

Your Financial Circumstances: While having an adverse credit history will not exclude you from applying or being approved for a bridging loan lenders will always carry out a check. However, as long as they are satisfied that you have security to cover the amount you wish to borrow in the event of you defaulting on the loan some lenders will be prepared to approve your loan. 

Is There a Minimum or Maximum Amount When it Comes to Bridging Loans?

The starting point for a bridging loan is usually £25,000 and for amounts lower than this other forms of finance such as personal loans will be more appropriate. Generally there are no upper limits when it comes to bridging loans with some of them running into millions of pounds. The amount of any loan will be directly related to the amount of the security you can provide. 

 

Having more security will potentially give you access to higher loan amounts but again this is compl;etely at the discretion of the lender. If you have a strong exit strategy a lender is likely to feel more confident when it comes to offering you a higher value loan. 

What Can You Use as Security?

Usually the higher value of security you can provide the more money you will be able to borrow. If you are using property as security then the equity in that property will directly influence the amount you can borrow. 

 

While property is a main source of security when it comes to bridging loans it is not the only option. You can also use other high value assets such as investment portfolios, pension, fine jewellery, fine art and high value cars.

 

Can You Borrow More for a First Charge Bridging Loan Than you Can for a Second Charge Bridging Loan? 

Most lenders will allow you to borrow up to 75% of the value or equity that is in a property. However, you can usually borrow more for a first charge bridging loan than a second charge bridging loan. This is because with a first charge bridging loan you will usually be borrowing against the whole value of the property, whereas with a second charge bridging loan there is already a charge on the property, and you want to borrow against any equity that is left in it. However, the lender’s primary concern is that there is enough value in the property to cover the loan if you default on payments. 

 

Hopefully the information contained in this article has provided some clarity around how much you can borrow with a bridging loan. At Pyxis we have years of experience and expertise when it comes to helping clients get the maximum amount of bridging finance available to them. If you are looking for a bridging loan why not let our team help put you in touch with a specialist lender that can provide you with the loan you want at the best rate of interest available to you.