When you are looking for quick access to money, a bridging loan can help you fill short-term funding requirements, until a longer-term solution is found. A bridging loan requires a considerable deposit, but how do you get a bridging loan calculator when you don’t have one? That’s when you need a 100% bridging loan.
What is the 100% Bridging Loan?
If you are looking to get the total amount of the property’s value, you will require 100% bridging finance in London. You don’t have any deposit to put down for your bridging loan and you still wish to borrow the full amount against the value of the property you are planning to buy, then 100% LTV bridging finance can be helpful to you.
However, you will need to put additional assets as collateral, and it is not always feasible. Hence, it is commonly referred to as ‘100% funding’ as without other valuable assets to put as a deposit, this is not possible.
Qualifying for a 100% bridging loan can be quite difficult for borrowers – mainly for two reasons:
- The criteria to qualify for a 100% bridging loan are not often met by the lenders. The lenders will need you to put additional security on top of the primary security. Additional security will most likely be the assets you already own.
- With no deposit from the borrower, lenders are much more hesitant to offer the total amount of property as bridging finance. Lenders see this as a high-risk loan when a borrower is not investing any amount into the purchase themselves. Therefore, only a few lenders agree to offer 100% LTV bridging loans.
That being said, it is still possible to access a 100% bridging loan, despite strict requirements. It comes down to finding the right lender who is willing to offer a loan according to your particular circumstances.
Another way to secure a 100% bridging loan is to purchase a property at a below-market value price and take the bridging finance against the property’s open market value rather than the sale price. Examples of purchasing properties under market value when you want to use 100% bridging finance are:
- Buying property from a relative or a very close friend
- You are a sitting tenant and the owner agreed to sell at a reduced price
- Buying property at auction
- Property owner wants a quick sell due to time constraints
- You have carried out property restoration for a customer and they are unable to pay you. So, you agree to buy the property from them at a reduced price.
100% bridging loans do seem a helpful financing option, but can soon become a burden if not planned properly. With 100% bridging finance, the risks and costs are also elevated, so it is crucial to understand its implications to make an informed decision.
The collateral you put instead of a deposit, be it your home or any other asset, the lender has the right to repossess your asset if you fail to repay the loan in the agreed time duration, which usually ranges from 6 to 36 months.
Another important thing to consider is the high monthly interest rates that come with a bridging loan. The interest rates usually start from 0.39% and can go as high as 1.5%. With 100% LTV, you can expect this rate to go even higher. That means you will be paying more money at the end of the term.
When making such critical financial decisions, it is advisable to seek guidance from a bridging loan expert who can help you go through the process of securing such a great loan depending on your financial purpose and circumstances.
There are no fixed eligibility criteria when it comes to 100% bridging finance because it is offered in rare circumstances. However, your application is likely to be considered for a 100% bridging loan only if:
- You are securing a loan on a high-quality property. The lender would carefully look at the property you put as security to know if it has prominent value and location, and it is easy to sell if repossessed.
- You are an experienced property developer. Your application will be considered low-risk if you have a history of successful projects.
- You have a good credit profile. Usually, some lenders aren’t concerned about credit issues, but you are likely to get better terms if your credit history is clean.
- You demonstrate a strong exit strategy. No bridging loan is possible without this. The exit strategies are usually the sale of property or a remortgage of the existing property.
Preparing the Application
Getting a 100% bridging loan is not an easy task. To qualify for the loan, you will first need to prepare your application with the required documentation. A lender will review your application to see if you are a genuine borrower for a high LTV finance. Your application should include the following documents:
- Financial statements
- Credit history
- Income certificates
- Tax returns
- Documentation of the assets offered as security
Before you apply for the loan, you will also need to carry out a valuation of the assets that you wish to use as security. As you are not putting up a cash deposit, the lender will need to know the value of your assets and if they meet their requirements. Other assets that could be used as security are:
- Additional property
When it comes to preparing your bridging finance application for 100% LTV, a bridging finance broker can help you understand every detail of the loan before you sign the agreement.
Unlike other forms of loans, you won’t be putting down any deposit or having any equity in purchasing a property, which means you will be borrowing the entire amount for that purpose. When borrowing 100% of the value, the lenders set high interest rates and additional fees in order to mitigate risk, which will be higher than that of a traditional loan.
When applying for 100% bridging finance, you may have to pay certain fees, such as valuation fees, arrangement fees, underwriting fees, etc., which will be some percentage of the total loan value. Meaning, the higher the loan amount, the higher will be these fees.
For higher LTV, the lender may charge higher interest rates for risk mitigation and additional security. That means you will be paying more for your loan. The lender may allow you to roll up interest payments and pay altogether when the loan term ends. This prevents cash flow disruption during the development project or any other expenses that you may have during the project course.
Contact a bridging finance expert who specialises in 100% bridging loans
Connecting with a regular broker is of no use when you are looking for specialised bridging loans. Working with anyone can put your application prone to rejection, resulting in ruining your credit score. You require someone who has in-depth knowledge and understanding of the bridging finance solutions market and has a history of successfully executing applications for 100% LTV bridging finance. Always speak with a specialised bridging finance broker for the best advice and competitive deals.