A 100% Bridging loan is a bridging loan that will cover the full value of a property you wish to purchase. 100% Bridging loans are uncommon as it means greater risk for lenders. The usual max loan to value for a bridging loan is 75% of the property value this means that you will need to have a deposit of at least 25% to get a Bridging loan. This is unless you can use other security to convince a lender to approve a 100% Bridging loan.
Getting a 100% Bridging Loan
There are only two real ways to get a 100% bridging loan and these will depend on the amount of equity you have in other properties/assets and also whether or not you can find a lender willing to accept you.
Using other assets as security
Adding extra security from property you already own is the most likely way in which you will be able to get a 100% bridging deal. Using the equity you have in other properties such as a buy to let will allow you to safeguard a bridging loan against them. There are a number of lenders that will allow you to use other assets as security as it will lower the risk of borrowing.
If you do not have any other property or assets to use as security it is unlikely that you will be able to get a 100% bridging loan
Buying Below Market Value
The other route to getting a 100% bridging loan is to buying a property under market value. For example if a property is valued at £200,000 but you have the opportunity to purchase it for £140,000 that is 70% of the market value. Note: There are few lenders that will accept this kind of situation so it is a good idea to speak with an expert advisor that will be able to guide you through the process.
If neither of the above options is suitable for you then it is highly unlikely that you will be able to get a lender to lend 100%.
What are the costs?
The interest rates on bridging loans range from 0.49% to 1.5% depending on circumstances. Each lenders criteria is different as are their affordability calculations. It is best to search the whole of the market through a commercial mortgage broker who will be able to understand your situation and find the best lender to match. There is usually an arrangement fee with can be 1-2% of the loan amount. This can be added onto the loan.
What are the risks?
As with any secured loan, if you cannot keep up with the repayments your property will be at risk along with any other property you may have used as security. It is essential to ensure you can afford the finance before applying. Ensuring you have a viable exit strategy is essential for any kind of short term secured finance.
Am I Eligible?
Bridging finance is always assessed on a case by case basis. When looking for a high LTV it is essential to ensure that you are eligible for any kind of bridging loan before trying to convince a lender to grant a 100% bridging loan.
Each lender is different but to give you an idea of what they are looking for read through the bullet points below
- Clean Credit – while some lenders will consider applicants with bad credit, the best rate will be reserved for applicants with a good credit history.
- Equity – Having a property portfolio or any other property that can be used as security will lower the potential risk for lenders increasing your chances of getting the best rate.
- Experience – As with any commercial finance, if you have a good record or history in property the banks will view your application as lower risk and it will help to get you the best rate.
If you think that you will qualify for a 100% bridging loan get in touch today and one of our expert brokers will help you through the process and find you the best deal to suit your circumstances. Get in touch by filling in one of our enquiry forms or call us today!