Residential Bridging Loans Bridging Loans Bridge Loan

24 August 2023

Author: Andrew Jones

Bridging loans are, unfortunately, plagued by myths that discredit them and often deter potential borrowers from considering them. 

Despite these myths, bridging loans have emerged as a popular option for property businesses seeking quick and flexible funding solutions, but why is that? 

In this blog, we aim to debunk the three most prominent myths surrounding bridging loans, run through the criteria you need to meet in order to be accepted for one, and shed light on the benefits of using bridging loans for residential, commercial, and development property businesses.

Myth #1: Bridging loans are only for desperate borrowers

One common misconception about bridging loans is that they are solely meant for borrowers facing financial difficulties or struggling to secure traditional bank loans. However, this couldn't be further from the truth.

While bridging loans do provide a lifeline for those in urgent need of funding, they are also used by astute property investors and developers to seize lucrative, often time-limited opportunities before they pass by. 

Because bridging loans have a faster application and approval process, you can have the funding you need in the bank incredibly quickly, perfect for any time-sensitive property investments. 


Myth #2: Bridging loans have exorbitant interest rates

Another prevailing myth is that bridging loans come with sky-high interest rates, making them an unaffordable financing option. 

While it is true that bridging loans generally have higher interest rates compared to traditional mortgages, it’s important to remember that bridging loans, as the name implies, are meant to bridge the gap between property sales, or finance time-sensitive property development projects. 

As a short-term loan, slightly higher interest rates should not be a concern; higher interest rates are simply a reflection of the lender’s risk exposure during this short time period. 

In addition, the speed and convenience of bridging loans often outweighs the higher interest costs for borrowers, as immediate access to capital often opens up opportunities that traditional loans may not be able to.

Myth #3: Bridging loans are only for residential properties

Contrary to popular belief, bridging loans are not only used to help purchase residential properties.

They can be used for various types of property purchases, including commercial real estate and development projects.

Whether you're looking to acquire a new office building, renovate a retail space, or develop residential units, bridging loans are the fastest, and often most cost-effective way to get the funding you need quickly and easily. 

Not only this, but bridging loans are versatile and can be customised to suit different property types and financing needs – the possibilities are endless!

What bridging loan criteria do you need to know?

In order to get a bridging loan, you’ll usually need to meet certain criteria set by lenders.
While specifics will vary from lender to lender, the most common bridging loan criteria that you need to consider are:

What’s your exit strategy? 

Lenders will want to know that you’ve got a clear plan to either sell, refinance or secure alternative long-term finance. Remember, your bridging loan is short term (often around 36 months), so you’ll need to demonstrate what your plan is following this period.

Have you got security?

Loan security usually comes in the form of property or real estate. A lender will evaluate the value and marketability of any property you offer as security.

What’s the loan-to-value ratio?

Lenders often have a maximum LTV (loan to value), which determines the percentage of the property value that they are willing to lend. Typically, bridging loans can range from 65% to 75% of the property value, which means you’ll need a cash deposit of around 25-35% to secure the loan. 

How’s your credit score?

While bridging loans are a more flexible type of finance, you’ll still need a relatively strong credit score to obtain the lowest interest rate, as the lender needs to know you’ll repay the loan! They’ll likely check your credit history, outstanding debts and your overall financial position before giving approval for the lowest rate.

What’s your repayment plan?

Here, a lender will assess your income, cash flow and financial stability. For development projects, they may also look at your track record in property development to see whether you’re a safe bet. 

Have you got legal support? 

For substantial loans, you’ll need legal representation to handle legal aspects of the loan, such as property valuations, due diligence and documentation.



Are bridging loans a good idea? Here’s some of the key benefits

So, after all this you might be wondering if a bridging loan is right for you. Here’s the four key benefits to bridging loans, designed to help you make the right choice for your unique circumstances:

Speed and flexibility: Bridging loans offer a streamlined application and approval process, while tailored repayment terms and loan structures keep the finance bespoke to your needs. 

  • This speed is particularly advantageous in competitive property markets where time is of the essence. 
  • Bridging the finance gap: Bridging loans are specifically designed to bridge temporary financial gaps, enabling you to proceed with acquisitions, developments, or refurbishments while awaiting longer-term financing or the sale of existing assets. 
  • Property chain flexibility: Nobody wants to endure property chain delays. 
  • If the buyer of your existing property is dragging their heels, a bridging loan can provide the necessary funds for you to crack on with your next project, safe in the knowledge that you can pay it off in full once your sale goes through. 
  • Repayment options: Bridging loans offer various repayment options to suit borrowers' needs. 

Some loans allow for deferred interest payments, which can be beneficial for developers who anticipate that their cash flow will improve once the project is complete. 

Other lenders offer flexibility in repayment, enabling you to repay the loan in a lump sum upon the sale or refinancing of the property.

Flexible, reliable bridging loans in the UK

There’s a lot to digest when it comes to bridging loans.
Fortunately, you’re in the right place!

Rapid Bridging are leading the charge in making fast bridging loans reliable and accessible to individuals and organisations across the UK. 

Whether you know exactly what you need, and you’re ready to get started, or you need some advice, our specialists are here to guide you every step of the way.

Quick, painless, efficient – what more could you need? Click here to get in touch with a member of the Rapid Bridging team today. 

If you need short term finance a bridging loan could fill the gap