What Is The Bridging Loan Application Process?
By Space Coast Daily // March 29, 2023
Securing a bridging loan is a straightforward process. To obtain funding from a bridging finance lender, borrowers must follow specific lending criteria and an application process.
This guide will provide a step-by-step explanation of the bridging finance application process, but before that, let’s understand what bridging finance is.
Bridging finance UK is a widely used financial solution to fill a short-term funding gap. These loans have 3 to 12 months, with the possibility of an extension of up to 36 months. The funds are secured by collateral, typically real estate, and provide a bridge between financial needs.
Steps Of Bridging Loan Application Process
The bridging loan application process can take several weeks, from initial inquiry to disbursement of funds. However, if immediate funding is required, the process can be expedited. The steps involved in obtaining a bridging loan include the following:
A specialist bridging lender can assist you in:
- Selecting the right lender
- Securing a favourable deal
- Representing you in negotiations with the lender
- Presenting your case in the strongest manner
- Correcting any errors in the application process.
It is recommended to seek the assistance of an expert bridging broker when applying for bridging loans, as bridging lenders usually prefer to communicate through a broker. It will increase the chances of approval for the loan application.
The lender or broker will request certain information from the borrower during the initial enquiry. This information helps the lender assess the borrower’s credibility and ability to meet the loan requirements. The information typically includes the borrower’s age, identity, residence, and in some cases, bank statements.
Having more evidence of a stable financial situation makes it easier to obtain funding.
The lender is highly interested in understanding the reason for seeking a fast bridging loan. The borrower must comprehensively explain their loan request, including the required purpose and amount. The lender would also like to know if the loan will be used for commercial or residential purposes.
Lenders are primarily interested in understanding the borrower’s repayment strategy, typically through property sales or remortgaging methods.
To ensure a smooth assessment process, a bridging loan applicant must be transparent and provide accurate information. If any incorrect information is found, legal action may be taken against the borrower, or their application may be declined. Each application is evaluated individually, so the borrower needs to be forthcoming with details.
Upon completion of the evaluation process, if the bridging lender is pleased with the borrower’s proposal, the loan request is granted and moved forward for a survey and appraisal.
Survey and Valuation of Property
The decision to release funds for a regulated bridging loan is based on the results of a property valuation carried out by an instructed surveyor. This valuation helps determine the property’s equity value, which serves as security for the loan.
The Loan Quote
The loan offer, including the loan amount, interest rates, fees, and terms and conditions, is sent via email to the borrower based on their financial situation, the information provided, the valuation report, and market trends.
The borrower is given legal advice by a solicitor regarding the terms and conditions of the bridging loan agreement, ensuring they fully understand the agreement between themselves and the lender.
The necessary forms and documents are collected, including the Decision in Principle form, photo ID, proof of residence, and evidence of monthly income.
Entering into a legal contract with the bridging lender is done by signing a bridging loan agreement.
After the application process is complete and the agreement is signed, the bridging lender releases the funds. The borrower is obligated to repay the loan within the agreed timeframe, either through installments or as a lump sum at the end of the loan term.
How bridging can be a good option
Bridging loans are utilised by investors, private borrowers, offshore companies, partnerships, and property developers to swiftly purchase properties. They can be used for both residential and commercial properties due to the following advantages:
- Bridging loans can be arranged quickly, sometimes within a day or two if instant funding is required.
- The application process is simple and fast.
- Bridging finance/P2P lending offers flexible lending criteria.
- Without planning permission, they can be secured against various property types, including unmortgageable, commercial, residential, and land.
- Even those with bad credit scores can secure a bridging loan if they provide additional security or assets.
- Unlike long-term mortgage loans, bridging loans provide short-term financing.
- There are no exit fees or early repayment fees.
In conclusion, bridging finance is a valuable financial solution for those looking to fill a short-term funding gap. Potential borrowers need to understand the application process and the necessary requirements, such as a comprehensive explanation of the loan purpose and exit route, transparent and accurate information, and the property valuation results.
An experienced bridging lender or broker can be of great assistance in securing a favourable deal and increasing the chances of approval. Bridging loans offer numerous advantages, including quick arrangement, a simple and fast application process, flexible lending criteria, and the ability to secure the loan against various property types.
Additionally, those with bad credit scores may also be able to secure a bridging loan with additional security or assets. With its short-term financing options and no exit fees or early repayment fees, bridging finance can be a good option for those looking for a fast and flexible solution.