What is a bridging loan?

A bridging loan is really just a term and a better phrase would be temporary mortgage. Any bridging loan is secured against some form of freehold or long leasehold property or land as a first, second or third charge. My general experience tells me that most people that type "bridging loan" into a search engine are just looking to raise some temporary finance. For some this will mean the need to use a true short term non status temporary mortgage company. No lender describes themselves as this but this is the best overall description.

The main question is how much do you need, what is it for, how long do you need it for and how are you going to pay me back? The answer could be I need £30,000 to pay off a tax bill, I need the money for a couple of months until my new mortgage completes. The best type of loan is a bridging loan but this could take the following formats:

High Street Lender - I use NatWest Bank for this as they seem to be one of the only high street lenders that will provide short term finance. You may have to ring around as it is branch dependent. If you would like a contact number for a senior member please email me and I will email you a contact name and number.

Non Status Bridging Lender - All of the bridging loan lenders that are offering a short term temporary mortgage that you will find on the internet will vary in terms but the rates are all reasonably similar. Definitely more expensive than a high street bank but you may not fit their criteria for any of the following reasons. Too high loan to value, no proof of income, bad credit and speed are the main reasons.

New Mortgage - Believe it or not we can generally remortgage someone as fast as a bridging loan can be arranged and we probably arrange more long term mortgages than temporary mortgages. Sometimes people come to us for a bridging loan when they are in arrears with their mortgage. What is the point of raising some funds as a bridging loan when this will need to be redeemed at some point? Why not skip the non status bridging loan and go straight for a mortgage? If the property is up for sale then a non status bridging loan may be a better option.

Secured Loan - We arrange so many secured loans for many reasons. Non status bridging loan companies usually have a minimum borrowing of £26,000 and some as high as £50,000. This is because loans for less than £25,001 are regulated by the consumer credit act and for two reasons this is prohibitive. Firstly because with a loan of less than £25,000 there is an 8 day consideration period (cooling off) so this can delay the loan but secondly and most importantly there are certain terms that cannot be imposed such as default penalties and other expenses so for such a small loan that will only run for a few weeks or months there is no room for profit for the lender. Some of the less reputable lenders cannot add their naughty tricks to these loans so that is another reason.

It is possible to complete on a secured loan in 5 days in some circumstances and also it can be particularly helpful for people that have no money as all of the fees can be added to the loan. We have had people that have no cash at all so cannot raise the money for a valuation which every lender will need so a secured loan can be helpful here.