
We recently applied for our first bridging loan to purchase a property and here is what we learnt during the process:
Use Your Property as Additional Security: If you own a property with no mortgage, you can use it as additional security for a bridging loan, which means you may not need to pay a deposit.
Restrictions on Subletting: Lenders generally don’t offer loans against properties that are sublet to a company. The property must either be vacant or let on an Assured Shorthold Tenancy (AST) agreement.
Loan Duration: While bridging loans are typically short-term, you can borrow for up to 18 months in certain cases.
Cover Extra Costs: A bridging loan can be used to cover additional expenses like stamp duty and solicitor fees, easing the overall financial burden.
Lender's First Charge: The lender will take a first charge on your property. If there is already an existing charge, it must be cleared before the lender will approve the loan.
Processing Time: While bridging loans are designed to be quicker than traditional mortgages, the process can still take up to 6 months to complete in some cases.
Loan in a Company’s Name: You can take out a bridging loan in a company’s name, with the directors acting as personal guarantors for the loan.
Insurance Requirement: You must provide buildings insurance that includes a "note of interest" from the lender, confirming their interest in the property.
Board Minutes for Companies: If purchasing through a company, you’ll need to sign a board minutes document confirming the company’s approval of borrowing funds for the property purchase.
Joint Ownership Considerations: If you’re using a jointly owned property as additional security, the other owner must sign an Independent Legal Advice (ILA) document. This confirms they understand the implications of granting a Deed of Charge and the associated risks.
Are you trying to apply for a bridging loan? Email contact@k2kproperty.com for more information.
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