Bridging finance is a uniquely flexible product, with terms and conditions tailored to each borrower’s exact requirements. LTV, monthly interest, and the term of the loan – these and other factors are all open to negotiation.
What is the maximum a person or business can borrow, in the form of a bridging loan? Are maximum loan values capped and how difficult is it to qualify for a high-value bridging loan?
Typical Bridge Loan Values
Truth is, there is technically no such thing as a ‘typical’ bridging loan value. Most lenders issue bridging finance starting from a minimum loan value of £50,000. This can be as low as £10,000 in some instances, depending on the borrower’s requirements and case.
At the opposite end of the scale, maximum bridging loan values are not ‘capped’ at all in the traditional sense. The maximum loan value available to an applicant will be based entirely on the specifics of their application.
For example, the value of the assets provided as security for the loan will impact how much they can borrow; as will the strength and reliability of their exit strategy – i.e. when and how they will repay the loan. Credit history, professional background and other factors may also play a role.
Consequently, maximum bridging loan values are different from one product and lender to the next. Issuers are limited only by their own access to capital – some offering bridging finance of up to £50 million or more.
It depends entirely on what you need the money for, when you can pay it back and whether you can provide sufficient security to cover the full costs of the facility.
Is It Difficult to Qualify For a Large Bridging Loan?
Understandably, eligibility requirements for larger bridging loans are considerably strict. The amount you can borrow will be limited to the value of the assets against which the loan is secured, typically at a maximum LTV of 85%.
This means that if you use a property with a value of £500,000 as security, you may be able to borrow £425,000 (at 85% LTV).
The difficulty or otherwise of qualifying for a large bridging loan will always lie in the strength of your application. If you can provide sufficient evidence to convince your lender that the transaction is low-risk, you have every chance of qualifying for the funds you need.
Does a Large Bridge Loan Need a Bigger Deposit?
Not necessarily, but larger deposits can make it easier to qualify for high-value loans and gain access to preferential interest rates.
As a general rule of thumb, the higher the LTV on a loan, the more you can expect to pay by way of overall borrowing costs. This is due to the fact that high LTV loans are naturally considered higher risk on the part of the lender.
If you are able to cover 25% of the costs yourself, a 75% LTV bridging loan may be much easier to obtain than an 85% LTV loan. Where larger bridging loans of the highest value are concerned (and the risk level for the lender is comparatively high), a deposit of 50% for a 50% LTV facility could boost your chances of qualifying.
How Do Lenders Charge Interest on Large Bridging Loans?
Interest on larger bridging loans is charged in the same way as all other bridging loans. Monthly interest applies (typically at a rate of 0.5%), which can be paid monthly or rolled up into the final debt payable.
Depending on the lender you choose, additional charges like arrangement fees, administration fees, completion fees and so on may apply. It is therefore important to consider the total costs of the loan you plan to take out, rather than focusing disproportionately on interest rates alone.