Can you get a bridging loan for an auction property?

Yes, if you are purchasing a property at auction it is likely you will need to fund this purchase through a lender that offers auction bridging loans. Due to the short timescales you need to finalise the purchase and because properties bought at auction are usually in poorer condition, you may find a traditional mortgage is not suitable for the purchase. This is where a bridging lender experienced in auction purchases can assist.

Refurbishment bridging loan

If you are buying a property which is not in a liveable condition, then you will need a refurbishment loan to purchase the property. Depending on the condition of the property you may need either a light or heavy refurbishment loan.

Some properties bought at auction may fall into this category. This can include properties without a kitchen, running water or the property is not wind and water tight.

Light Refurbishment Loan

Light refurbishment loans cover minor renovations or cosmetic updates, typically involving smaller amounts and shorter terms. These usually have slightly lower interest rates tailored for smaller development projects.

There’s no strict definition of a light refurbishment project, but usually, it’s one where, Planning permission is not required, there is no change to the nature of the property and building regulations do not apply.

Heavy Refurbishment Loan

Heavy refurbishment loans are for extensive property renovations, such as structural changes or significant extensions, requiring larger amounts and longer terms. These are offered as finance for larger development projects, where the lender’s risk and administrative involvement are greater – consequently, their interest rates are higher.

A Heavy Refurbishment bridging loan will be appropriate for projects where: structural refurbishment is required.

Are bridging loans high risk?

Bridging loans can be high risk due to their short-term nature and higher interest rates. You need to make sure you have a credible exit strategy as you need to pay back the loan within the timescales provided by the term of the loan. Assessing whether a bridging loan is the right option for you is part of our job and we are hear to make the option as risk free as possible.

Are bridging loans expensive?

Bridging loans generally have higher interest rates and fees compared to traditional mortgages. This is due to the high risk of the property for the lender, the quick access to finance they can provide and the flexibility they can offer.

Interest payments are accumulated on a monthly basis and therefore the longer you have a bridging loan, the more interest you will pay, so you will want to ensure you plan your exit strategy well and ideally have no delays which could end up meaning you pay back more as a result.

Do I need proof of income for a bridging loan?

Most bridging providers will assess your income as part of the assessment of the loan. If you are paying bank the bridging loan on a monthly basis then you will need to prove you can make the repayments.

If you are rolling the interest up, bridging lenders may still need to assess your income, depending on what your exit strategy is.
There are some lenders that do not assess your income, these lenders usually are slightly higher in the rate they will offer you.

Can I use a bridging loan to purchase a buy to let property?

Yes you can use a bridging loan to purchase a buy to let property. The common name for this is a bridge to let. Financing a property through a bridge to let loan can allow you the flexibility to purchase a property quickly as well as properties at auction or properties in an unmortgageable state.

Further down the line, you can take out a standard mortgage on the property to pay off your bridging loan or sell the property.

Can you use a bridging loan for a BTL deposit?

Yes, you can use a bridging loan to use as a BTL deposit. You will need to secure the bridging loan against a separate property to the one you are buying.