Dax McLean, Author at Mortgageable

Renovation Mortgages & Conversion Loans – How do they work?

by Dax McLeanPosted on 5th November 2020 | Updated 20th January 2023

A refurbishment or renovation mortgage, or refurbishment finance, are types of loans that enable renovations or repairs to commence on a property.

Refurbishment loans can be used to finance a property purchase as well as funding the developments.

A refurbishment mortgage is a short-term finance solution that requires a strategy from the onset to notify the lender of how it will be repaid.

There can be the flexibility of the exact timing that the finance will be settled, where certain factors are unknown such as completion times.

Often the main benefit of a refurbishment loan is that funds are released quickly so that works can start as soon as possible.

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Renovation Mortgages Explained

Types of Refurbishment Loans

Renovation or refurbishment mortgages or loans are typically categorised by scale, light to heavy, depending on the level of the cost needed to make the renovations.

Light refurbishment finance would be applicable to properties that do not require planning permission or building regulations in order to proceed with the developments, such as:

Installing a new bathroom or kitchen.
General redecoration.
Fitting windows.
Undertaking electrical rewiring.
Installing heating systems.
Non-structural developments.

Light refurbishment can involve a combination of the above or simply aesthetic changes such as improvements to fixtures and fittings.

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Whereas heavy refurbishment finance would be for larger projects, which are likely to cost more than 15% of the value of the property.

Heavy refurbishment projects will require more formal planning and building regulations requirements, such as:

Structural works.
Demolitions.
Property extensions.
Property Conversions.

Due to the nature of heavy refurbishment projects, the duration of time that the finance will be needed for should be considered, including allowing time for the planning stage.

For this reason, heavy refurbishment loans are often required for a minimum of 18 months, and therefore costs can add up.

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For even larger projects, such as developing multiple units such as an apartment block, or building a property in its entirety, development finance or commercial finance options would be considered.

There are also other circumstances where refurbishment mortgages are not eligible as the associated property is not deemed mortgageable.

There are a number of reasons why mortgages are not granted on certain properties, a few of these are listed below:

Property that is uninhabitable for reasons such as it is in a poor condition, the property is derelict or not weatherproof.
There is evidence of Japanese Knotweed or other invasive plants.
The property suffers from damp, rot, subsidence or flooding.
The property value is under £50,000.
Leasehold properties with a short lease.
Planning permission is missing for part or all of the building.
The property is not registered with the Land Registry.
Properties that are commercial or partly commercial, such as a residential unit above a shop.

You can always consider the DIY option for smaller projects, like upgrading your heating and cooling system, but of course, this is not possible for everyone and larger, more complex projects demand experience and time.

Roy from Cold Hot Air says: “Some tasks can be done quite easily using some old fashioned DIY, meaning you can avoid getting a renovation loan in some cases.”

“Even seemingly complicated repairs like HVAC systems can be quite simple to repair and in some cases install, but it does require some commitment to research and learn beforehand, which obviously isn’t for everyone.”

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Renovation Mortgages Rates

Mortgage rates and other associated fees will often depend on the property itself and the circumstances of the applicant. Typically, refurbishment mortgage rates start around 5%, and rise for heavy refurbishment projects.

One main factor when considering refurbishment finance is that the values available are usually around 75% of the proposed property value following the completed refurbishments.

Obtaining more than 75% of the post-refurbishment value is often very difficult, following the credit crunch in 2007.

Should more finance be required, other funding options may be required.

Due to the variable factors, including the range of property projects, seeking the advice of a specialist mortgage advisor or broker may be beneficial to find a tailored solution, across a wide range of lenders.

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Alternatives to Refurbishment Mortgages

In some circumstances, refurbishment mortgages are not valid against the type or condition of the property. In these situations, bridging loans can be used to develop a property promptly, to then subsequently apply for a traditional mortgage against the property.

In this situation, often the property in its original condition is not deemed mortgageable, either due to structural issues or did not have kitchen or bathroom facilities at the point of purchase.

Another example where bridging loans are commonplace is at auctions as the finance for the deposit are required upon winning the property, and therefore the refurbishment mortgage process takes too long.

A bridging loan is also a short-term financial product however, it requires the applicant to own another high-value asset to be able to access the equity within it, technically utilising this as a down payment towards other property.

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A bridging loan also results in a charge on the other property that the loan is associated with for security. A charge prioritises the order that debts will be handled should the property owner not be able to make the repayments on the loans.

For example, in the case of a first charge loan, if the property was seized from the owner due to non-payment and subsequently sold, a first charge loan would take priority of being repaid from the funds of the sale.

Whereas a second charge is a terminology used to describe that a loan or mortgage is already in place against a property. In this circumstance, permission from the first charge lender is often required before a second charge can be added.

Due to the increase of risk to the lender, interest rates on loans where a second charge would be applicable are higher.

The suitability of a bridging loan would depend on the circumstances of the applicant as certain criteria need to be met including an exit strategy due to the nature of the short term finance option.

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Renovation Mortgage Lenders

Although there will be some high street lenders that offer refurbishment finance options, typically the constraints of their financial products do not cover the nature of various property development projects, and therefore specialist lenders may be required.

An experienced financial broker would be able to propose a range of financial scenarios, customised to the requirements, to be able to advise the best option, saving the applicant both time and money.

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Renovation Mortgages Summary – Contact us Today

Our expert mortgage advisors are here to help you find a lender from which you can secure a good deal from. Deals available will be based on your financial situation and so you’ll have a much easier time finding a loan that is best for you.

Give us a call on 03330 90 60 30 to speak to an advisor, or contact us for mortgage advice that’s personal to you and takes your credit history into account. That way you’ll know where you stand in the mortgage market and we can guide you on your route to securing a suitable loan.

Further reading:

Can you Get a Mortgage for Land? Land Mortgages Explained

by Dax McLeanPosted on 5th November 2020 | Updated 20th January 2023

Can you get a mortgage for land? The answer is that yes it’s possible, however, it’s important to be aware of the criteria.

Often mortgages are thought of as being for the purchase of residential property only, however, secured finance can also be obtained against land in a similar way, for a range of purposes.

The mortgage process to obtain a piece of land would be similar to that of a residential mortgage.

For example, the same checking process would take place such as; searching the applicant’s credit history, valuing the asset and undertaking the necessary legal searches.

However, mortgages for land are more specialised than for residential properties, therefore the lenders may differ, and additional criteria needs to be met.

One important criterion is the reason behind the land purchase and defining the ongoing use of the land. Once these are established, navigating the market to seek the appropriate finance will become clearer.

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Different Types of Land Mortgages

Within the UK, the land is categorised by its purpose, for example for agriculture, residential or undeveloped land.

The planning laws can change depending on the objectives of the government at the time, but the laws provide the framework of rules and guide how easy or difficult it is to change the category of land and seek planning permission.

The type of mortgage needed to fund the land purchase will depend on the current category of the land, the planned usage and whether planning permission has already been sought.

The following guide explains the different options of land mortgages.

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Self-Build Land Mortgage

A self-build mortgage is a hybrid concept, linked to both the value of the land and the proposed value of the completed build.

However, one big difference from a traditional residential mortgage, is that the finance is provided by the lender in stages, releasing cash throughout the build phases, for example, to pay for labour and materials during the project.

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Agricultural Land Mortgage

Mortgages on land are also provided as part of a business venture or as owning land as an investment.

With this type of mortgage, the application would often need to be supported by a plan of how the land would be used, such as a business plan.

The document would illustrate the plan to farm the land by the applicant themselves or by leasing the land to a contract farmer for example and detail the relevant income streams.

The category of land would therefore be of interest to the lender, to ensure that it matches the applicant’s plan.

Woodland Mortgage

There are opportunities throughout the UK where an individual can purchase a plot of woodland. Often the change of use or land category can rarely be altered from woodland, however, areas of woodland can be purchased as investments or used for various business models such as woodland sanctuaries.

A woodland mortgage is often deemed similar to an agricultural mortgage in the application processes and with any associated restrictions.

Commercial Development Mortgage

Entrepreneurs or large businesses may seek to purchase land with plans to make developments such as to build residential or commercial units upon it.

A formalised and documented business plan and strategy will be required before a commercial development mortgage application can be submitted.

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Mortgage on Land Criteria

As mentioned earlier, a land mortgage application would undertake the same checks as a traditional residential property mortgage application such as a credit check and valuation of the land however there are some differences.

The main factors that affect the ability to obtain a land mortgage and the terms offered are as follows:

The type of land or category of use.
The applicants plan to utilise or develop the land.
The applicant’s credit score and credit history.
The loan to value ratio – The required mortgage level versus the total value of the asset.
The deposit amount.
Any additional guarantees such as securing the loan against any other assets owned.

Land mortgages are often deemed riskier to lenders than traditional residential mortgages, therefore, to obtain a mortgage on land additional details of the transaction and future plans such as any linked income to be generated by the land are required.

Interest rates on land mortgages may be slightly higher than those offered on a property mortgage

Higher deposits are often commonplace with land mortgages. This is due to the level of risk lenders associate with this.

One reason that land is deemed higher risk to lenders is that typically the sale of land is a slower process, therefore if there were any repayment issues, it would take the lender longer to seize the asset and sell the land to recoup the funds.

Therefore, land mortgages are often only offered up to 70% of the value of the asset, requiring the applicant to cover the remaining 30%, either with a cash deposit or via securing additional funding against other assets owned with sufficient equity.

The current planning permission status on the land sought to purchase is also of high significance to lenders.

Should a developer wish to build upon land that does not have planning permission, lenders would consider this an additional risk as being granted permission can be a lengthy process and is not guaranteed. However, the land is commonly sold with the relevant permissions to increase the value of the asset to the current owner.

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Other Land Financing

The land is often sold through auction, which requires a deposit paid upon winning a lot. Therefore, due to the speed of such a land transaction, bridging loans are often used to provide short term finance promptly whilst the sale of other assets is in progress.

Mortgages on Land Summary

The land is often deemed a scarce resource and therefore investors often seek to purchase land to retain as an investment or develop to sell on later.

There are many options available to secure a mortgage for the purchase of land as long as the additional criteria can be met including a plan for future use and any associated business plans.

Related reading:

Land Mortgages – Contact us Today

Further reading:

Can you get a Mortgage with an IVA? (UK Guide)

by Dax McLeanPosted on 5th November 2020 | Updated 20th January 2023

Having an individual voluntary agreement (IVA) can cause issues when looking to secure a mortgage, however this guide will provide some insight into overcoming some of the common hurdles.

What is an individual voluntary agreement (IVA)?

An individual voluntary agreement or IVA is a process to avoid bankruptcy where a person signs a contract to make certain repayments of debt to the lenders.

People often opt for an IVA when they are facing financial troubles and cannot pay off all debts in full.

When entering into an IVA, the interest is frozen on outstanding debts and possibly the repayments are lowered to a more manageable amount.

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How does an IVA after your credit rating?

A credit score illustrates how worthy of credit an individual is at a given time.

The score is calculated by credit reference agencies by reviewing an individual’s credit history.

Lenders will use a credit score to analyse an individual during a credit application.

An applicant’s credit score will determine if an offer of credit can be made and the terms available to them such as the interest rate offered.

Someone with an IVA will have their credit score impacted. If an IVA is still active, further credit may not be offered, due to the level of risks that lenders would face.

An IVA agreement will stay on the financial records for six years following the date of the IVA agreement.

Once the agreement had concluded, a completion certificate should be issued to formally document that the IVA has been settled.

At this point, it is worth checking that the credit records have been updated correctly.

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Windfall Clauses

IVA’s often contain a windfall clause which means that if a sudden cash sum is received during the duration of the agreement, it is given to the creditors.

The clause relates to any sum of money received such as a cash prize, inheritance or pay-outs.

Therefore, if someone who is subject to an IVA manages to gather the funds for a cash deposit during the period of the IVA, creditors may challenge the source of the money.

Looking for a commercial mortgage with bad credit? You may be interested in the possibility of shared ownership.

Improving a credit score following an IVA

As more time passes following the settlement of an IVA, a potential mortgage applicant’s credit score will improve, therefore increasing the chances of obtaining a mortgage.

After six years, an IVA will drop off a credit history, however, a credit score will be impacted due to the lack of borrowing. Lenders will therefore be nervous as recent responsible use of credit has not been documented.

Top tips to improve your credit rating:

1. Check your credit report – Request a report from a reputable credit reference agency and review the content. If there are any errors, either contact the company directly or the credit reference agency whom the report was run with to investigate.

At this point, it is also worth checking the financial associations listed and requesting the removal of any old information, such as links to ex-partners.

2. Register to vote – By registering to vote you will be added to the electoral roll, which is another record that lenders can check to confirm the identity and address of applicants.

3. Apply for credit wisely – Every credit application will leave a mark on your credit file, which other lenders can see. Therefore, the history of any denied credit applications may also be visible.

4. Keep credit usage low – When applying for new credit, lenders will review a number of elements of your credit file, not only any outstanding balances but also the value of available credit.

5. Build a good credit history – Building a positive credit file shows that you can be responsibly borrowed, make regular and appropriate payments and remained within the credit limit. If you haven’t had any credit before, lenders will be nervous as there haven’t been any records of managing credit.

There are financial products on the market aimed at those who are building a credit history or recovering their credit file, such as ‘credit builder’ credit cards.

Often the interest rates will be very high therefore they are designed for the balance to be paid off in full every month for customers to document a pattern of responsible repayments on their credit file.

Want a mortgage for a rental property? They work slightly differently to regular residential mortgages, learn all about them in our buy to let mortgages with bad credit.

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How to get a mortgage with an IVA

Settling an IVA can improve an applicant’s chances of success when applying for a mortgage.

However certain lenders will always refuse applicants that have ever had an IVA, whilst others would consider applicants.

However, there is a middle option. There are a number of lenders who will consider lending to mortgage applicants who have settled their IVA three years ago.

To be in the best position for this option, not only is the IVA settled but applicants have rebuilt their credit history by documenting responsible borrowing and repaying debts over time.

In this scenario, it would be beneficial for applicants to have a higher deposit, between 15% and 25% of the value of the property value.

This reduces risks to lenders and therefore increases chances that lenders will be prepared to issue a mortgage offer.

Any mortgage offers provided to those applicants with a bad credit history are likely to be at a higher interest rate and for a lower value, due to the risks to the lender.

Before applying for a mortgage, it would be sensible to seek the advice of an independent mortgage advisor who can investigate options and advise on the best approach, before searching the property market.

Note: If you have a debt management plan, or a default, it’s also still possible to attain a mortgage with bad credit, but as with an IVA there are more things to consider.

Applying for a mortgage with an IVA? Contact us Today

Our expert mortgage advisors are here to help you find a lender which you can secure a good deal from.

Deals available will be based on your financial situation and so you’ll have a much easier time finding a loan which is best for you.

Give us a call on 03330 90 60 30 to speak to an advisor, or contact us for mortgage advice that’s personal to you and takes your credit history into account.

That way you’ll know where you stand in the mortgage market and we can guide you on your route to securing a suitable loan.

Bridging Loan Broker UK: Bridging Finance Broker

by Dax McLeanPosted on 5th November 2020 | Updated 20th January 2023

What is a bridging loan?

A bridging loan, otherwise known as gap finance, is the term used for a short term a financial product that provides funds to enable a purchase to take place while a sale is still in progress.

Bridging loans are often seen within the property industry for funding the purchase of a property or to develop property before other assets are sold.

Bridging loans are also commonplace at property auctions where access to deposit funds promptly is highly important so that bidders do not miss out on any lots that they are interested in.

Other reasons that bridging loans may be required are business ventures or a divorce settlement.

Bridging loans are short term secured finance, often with terms to settle within a year, and can be arranged on both residential and commercial assets.

Technically, a bridging loan utilises the equity within a current property as a down payment towards other property, resulting in two (or more) properties being owned while the sale is going through.

Bridging loans are a method of secured lending and therefore to apply for a loan, a procession of a high-value asset is needed.

Bridging loans can range from £5,000 to £10 million and a decision from a lender can be sought quickly, usually within twenty-four hours.

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What are the costs of a bridging loan?

Typically, interest on bridging loans can be fairly high.

The interest rate offered will depend on a number of factors including:

Total amount of the bridging loan.
Equity available within other assets.
Duration of the loan.
Overall personal financial circumstances of the applicant.

There will also be additional charges such as an arrangement fee and in some circumstances, exit fees applied by the lender. Some lenders also apply bank transfer fees and administration fees, therefore a thorough read of the fine print is very important to ensure all additional costs are known before committing.

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In addition, there will be other standard costs associated with asset purchases such as valuation and legal fees.

All associated fees should be known before an application is submitted. Most fees will be on a one-off basis, whereas interest is applied monthly.

The repayments can include the monthly repayment of interest or the settlement of the interest due can sometimes be delayed until the end of the term, however, either way, the interest costs will accumulate for the duration of the loan. Therefore, the longer the loan is outstanding, the more it will cost.

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Sourcing a Bridging Loan via a Specialised Bridging Finance Broker

One method of sourcing a bridging loan is to use a specialised bridging finance broker. Specialist brokers often have access to the whole financial market and therefore can provide quotes from a wide variety of bridging lenders.

By searching a wide range of lenders who will be offering an array of financial products, the best prices and terms can be found for every personalised situation.

A specialist broker will have insight into the market conditions and be able to advise the success rate of an application being accepted with which lenders.

Brokers also provide in-depth, knowledgeable advice from initial enquiry through to completion, assisting applicants to navigate a competitive market as well as guiding them through the application process.

In addition, if an applicant has any additional personal factors such as bad credit history, or any other concerns with the property purchase, the broker’s specialist advice can be invaluable.

As bridging loans are a short-term finance solution, the exit strategy will need to be identified and planned from the beginning of the process.

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Brokers can also assist with any further financial transactions required, keeping everything simplified and under one roof.

Brokers can also explore alternative options to a bridging loan such as a second mortgage or a remortgage on the current property, as well as personal loans (either secured or unsecured), providing independent advice on the options available.

Brokers can provide pros and cons for options such as the speed of bridging loans is a strong advantage, allowing transactions to proceed quickly.

Bridging loans are also flexible however the downside can be the cost of the interest and fees, especially if the duration of the bridging loan is likely to be more than a couple of months, as the interest is applied monthly.

Brokers can also simplify the process for applicants, explaining everything in everyday terms to applicants. Also, often there is a lot of information to source for an application, and traditionally this would require a lot of form filling, however by the use of automated electronic systems, this can be avoided.

The final benefit of using a broker is that often the specialist professional will liaise with the other parties involved such as solicitors, ensuring that any administration issues are handled promptly which can speed up the overall process.

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Costs of using a Broker

The costs of using a specialist broker can vary. A common approach is for the broker to take a commission from the lender and not charge the applicant directly. Another pricing structure that can be applied is a percentage of the loan amount.

Using a specialised bridging finance broker can save applicants both time and money, as well as relieving stress, knowing that a professional is assisting with your application.

Bridging Finance Broker Summary

As with any financial decision such as considering a bridging loan, it is best to seek independent financial advice, to read the fine print and to be aware of the consequences of the chosen financial product.

With any secured lending, there is the risk that the associated asset could be seized should repayments not be made.

At Mortgageable, we have a dedicated team of advisors that will be able to offer you help, point you in the right direction and provide you with access to some of the best bridging loan deals currently on offer.

Give us a call on 03330 90 60 30 or get in touch for advice that is personal to you and takes your credit history into account. That way you will know where you stand in the bridging loan market and we can guide you on your route to securing a suitable loan.

What is a Bridging Loan and How Does it Work?

by Dax McLeanPosted on 5th November 2020 | Updated 20th January 2023

A bridging loan is a short-term financial product that has been created to enable a purchase while the sale is still in progress.

Bridging loans are commonplace within the estate agency industry where the process of buying and selling a property can be lengthy.

Bringing loans can be used for many reasons including:

Purchasing a property.
Developing property.
A buy to let investment.
Business ventures.
Sourcing funding during a divorce.

Such loans are also commonly used by property developers when purchasing property at auction due to the speed of the deposit transaction to secure the property.

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Bridging Loans within the Property Industry

A bridging loan for property development provides flexibility to enable transactions to take place either at speed, as per the auction example above, or in stages.

The loans enable property owners to access the equity within their current property or property portfolio’s, utilising this as a down payment towards other property.

The result is that two (or more) properties are technically owned while a sale is concluding. Bridging loans are a method of secured lending and therefore to apply for a loan, the procession of a high-value asset is needed.

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Within the property industry, bridging loans can offer a cost-effective option to navigate the property market and purchasing process, especially if there are issues within the purchasing chain that need swift, short term action. However, bear in mind that there are often additional legal and administration fees to cover.

Alike, a standard mortgage, application processes will be applicable and credit searches and scoring will take place to assess the risks of the lending.

Types of Bridging Loans

There are two types of bridging loans as follows:

An open bridge loan – This loan provides the most flexibility as there is no set end date of when the loan needs to be repaid. Often open bridge loans can last up to a year or sometimes longer, depending on the circumstances.
A closed bridge loan – A closed loan will have a fixed end date and strategy, which are often linked to best-known assumptions of when you will have funds available to pay the loan back. Closed bridge loans are short term, often offered for no more than ninety days.

Due to the differences between open and closed loans, the costs also vary. An open bridge loan will usually be more expensive due to the flexible nature of the financial product.

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Choosing a Bridging Loan

Before researching the market to commence comparing various bridging loans, a few key facts will be required about the loan and properties that will be involved.

The ideal amount to be borrowed – Typically, lenders will offer bridging loans between £5,000 and £10 million.
The value of the owned property – The value of the currently owned property will impact how much that can be borrowed and the loan rates available.
The duration of time the loan is required – Best estimations are used to map out how long the additional funds are required for, for example, the timing of a housing purchase chain and the required legal process. As discussed above, the duration of the loan will define the type of loan needed.
The equity owned within the property – The level of equity and whether there is a mortgage currently on the property will affect how much additional funds can be borrowed.

First or Second Charge Loans

When a bridging loan is processed the lender will add a ‘charge’ to the property that the loan is associated with for security.

A charge prioritises the order that debts will be handled should the property owner not be able to pay the loans.

First charge loan – If the property was seized from the owner due to non-payment and subsequently sold, a first charge loan would take priority of being repaid from the funds of the sale.
Second charge loan – A second charge is used to describe a situation where a loan or mortgage is already in place against a property. In this circumstance, permission from the first charge lender is often required before a second charge can be added.

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Bridging Loan Interest rates

Bridging loans are similar to other borrowing in the fact that the interest rates applied often fall into two options, fixed or variable.

A fixed-rate interest rate would apply the same level of interest across the duration of the term, resulting in a flat rate repayment plan, each monthly repayment would be the same.

Whereas with a variable rate, the interest rate can charge, often linked to the Bank of England base rates. With a variable rate, payments will not remain static and can go up and down.

Costs of Bridging Loans

Typically, interest on bridging loans can be fairly high, depending on a number of factors including the values involved, the duration of the loan and the personal circumstances of the person seeking to borrow the funds.

Due to the short term nature of the loans, interest is applied monthly rather than annually. However, there are various methods that the lender can apply interest as follows:

Monthly – The interest is paid monthly as part of the monthly repayment amount and is not added to the bridging finance.
Deferred or rolled up – With this option, the lender has pre-stipulated that the interest is paid at the end of the loan arrangement and does not makeup part of each monthly repayment.
Retained – The total interest is also borrowed for a set period of time and paid back at the end of the loan.

As briefly mentioned earlier, there are often additional fees applicable to bridging loans such as administration fees. Lenders can also apply exit fees, applying an additional cost should the loan be repaid early, or arrangement fees due upon application.

Other costs to be aware of with most asset-based transaction include legal fees, valuation fees or broker fees.

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Bridging Loans Summary

As with any financial decision it is best to seek independent financial advice and be aware of the consequences of any decisions, such as what should happen if unable to meet the repayments.

Give us a call on 03330 90 60 30 or get in touch to talk to a bridging finance broker who can give you advice that is personal to you and takes your credit history into account. That way you will know where you stand in the bridging loan market and we can guide you on your route to securing a suitable loan.

Bridging Loans for Property Development

by Dax McLeanPosted on 5th October 2020 | Updated 20th January 2023

Bridging loans are a great way to secure a large injection of cash for individuals looking to finance a new property development, ideal for those waiting for the sale of a current development to be completed.

What is a bridging loan?

A bridging loan is a short-term loan, usually lasting anywhere from 12 to 24 months, and as the name suggests it is designed to provide a financial “bridge”.

In the context of property development, this is usually to provide financial support between the sale of one development and the initiation of a new one.

How much can you borrow with a bridging loan?

The exact amount you can borrow will depend on a variety of factors, one of the major considerations being the purpose of the loan.

For example, if you are borrowing against a residential property, it may be possible to borrow up to 80% of the property value.

The lower the loan to value (LTV), the lower the interest rates, with some lenders offering interest rates at 50% LTV.

For non-residential properties, such as commercial properties and land, it may be possible to borrow up to 70% LTV.

This means that if the property is worth £100,000, the maximum you could borrow (including your existing mortgage) would be £70,000.

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When is a bridging loan repaid?

Since the purpose of a bridging loan is to “bridge the gap”, the loan is repaid when the property is sold or refinanced.

Open bridging loans vs closed bridging loans

Bridging loans are defined in two main ways, typically as either open or closed.

A closed bridging loan is one where there is an established and detailed plan, including a timeline. For instance, if all transactions have taken place, but you are simply waiting for a final transaction to be completed. These “closed scenarios” are preferred by lenders and so you are likely to have more options available to you.

An open bridging loan is the opposite, it is a situation where timelines and payment details are less obvious. These are considered riskier to lenders and so you may have less favourable interest rates and loan amounts available to you.

Read our related quick help guides:

How much do bridging loans cost?

Loan terms are largely dictated and offered by the amount of risk the lender determines, as well as the revenue they need to create to maintain profitability.

A bridging loan, particularly one that is “open” is considered relatively risky and since the loan is only provided for a relatively short period of time, the lender does not generate much income from the interest alone, as a result, it’s common to pay additional fees on top of the interest.

The fee is typically referred to as an arrangement fee and varies between lenders. On top of this fee, it is common to have other associated costs including legal fees and valuation fees. For this reason, it is important to carefully read any contract before you sign and agree to the terms, as the associated costs could impact the profitability of the project.

Since the majority of property development projects generate no revenue until the final sale, monthly repayments are often not practical and as a result, many bridging loan lenders offer what is referred to as “interest roll-up”. This enables you to pay for the interest in a lump sum at the end of the loan period instead of paying in monthly instalments.

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Requirements of a bridging Loan

When assessing a bridging loan application, lenders will assess the creditworthiness of the borrower. This means they will be looking at your credit history, ensuring that it is in good order and that you do not have any defaults, county court judgments or previous bankruptcies.

Additionally, lenders will be looking at your history in the property development sector, to assess your track record. If both of these requirements are satisfied, you will likely receive bridging loan offers with more favourable terms.

How much the property is worth is also going to be considered. It is usual for lenders to offer a maximum loan to value ratio of around 60% for commercial properties and up to 80% on residential properties.

Can you take a bridging loan out in the name of a limited company?

Bridging loans can be taken out in either the name of an individual or a limited company.

It is also possible to take the bridging loans out for offshore companies, overseas companies, and foreign nationals.

Examples of common bridging loans scenarios

Here are some common examples of situations where bridging loans are commonly employed:

Bridging loans for debt consolidation

Property development can involve the accrual of several lines of credit, which by the end of the project can become expensive and difficult to manage. In such cases, a short-term bridging loan can be used to consolidate the debts into a single loan, which does not need to be repaid until the sale is completed.

Bridging loans to buy a new site

When starting a new property development project and acquiring a new site, a bridging loan is often used with the intention of gaining planning permission. Development financing often has a loan clause referred to as the ‘mobilisation period’. This is the time period given to arrange the build before works beginning.

Often, this period is under 4 weeks and would not provide you with enough time to execute the planning application and begin the work. If you neglect to achieve this, you will fail to meet the terms of the lender.

Moreover, there is no guarantee that a planning application will be approved. As a result, there is no assurance that the work will commence on a certain date and it is not possible to agree to the terms of a finance development loan.

In this scenario, a bridging loan can be employed to bridge the gap between the acquisition of a site and the development finance.

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Bridging loans to raise capital

If you need to raise capital, then a bridging loan can often be one of the quickest and most convenient ways to do so. Bridging loans can be used to raise capital for property development in the following ways:

Releasing capital from a completed property development with a pending sale.
Releasing equity from other properties in order to clear debts or acquire a new site.
Release funds to pay for upgrades or the redevelopment of a current property.

How do you apply for a bridging loan?

It is a wise idea to apply for a bridging loan as soon as it becomes clear that you require one. This provides you with plenty of time to plan and choose the best loan terms for your exact situation.

Give us a call on 03330 90 60 30 or get in touch with a bridging finance broker for advice that is personal to you and takes your credit history into account. That way you will know where you stand in the bridging loan market and we can guide you on your route to securing a suitable loan.

Bad Credit Commercial Mortgages UK Guide

by Dax McLeanPosted on 11th September 2020 | Updated 20th January 2023

While it’s true that you can find it much more difficult to find a suitable commercial mortgage when either you or your business has a bad credit history that doesn’t mean that there are no options for you at all.

In fact, there are many specialist lenders out there who show much more flexibility when it comes to finding a commercial mortgage with bad credit.

You just need to know where you stand with your financial situation and we’re here to help you out.

How to Get a Commercial Mortgage with Bad Credit

Before we begin, here are the major factors that determine your ability to get a commercial mortgage with bad credit:

Current financial status.
The severity of the poor credit.
How much time has passed since the bad credit.
The lender’s criteria.

Ultimately, having an adverse credit rating can impact your ability to secure a commercial mortgage, but it doesn’t necessarily make it impossible.

There are specialist lenders who offer commercial finance, but they will have specific criteria you will have to satisfy.

How Does a Bad Credit Rating Affect a Commercial Mortgage?

The reason lenders like to see your credit history and would prefer a good credit history is because it is an indicator of your liability to make the loan repayments.

When the credit rating is poor or your credit history shows a past of missed payments, defaults or repossessions, this serves as a red flag to a lender and they are likely to determine you a too high risk to lend money to.

In these cases, your mortgage application is likely to be declined by many lenders, but it is still possible to secure a mortgage with a poor credit rating.

High street lenders, in particular, can be a lot more reluctant to provide commercial mortgages to those with bad credit.

However, you will find niche and specialist lenders more willing to take less than ideal credit ratings into account.

It does highly depend on the specifics though as a default that occurred more than 12 months ago is not going to pose as much of a problem than the same occurrence less than 6 months ago. And so it does depend on the severity of your bad credit.

The best thing to do in this instance is to speak to an expert commercial mortgage advisor who can take a look at your credit profile and give you an idea of the possibilities available to you.

Factors that can contribute to a bad credit rating include the following:

CCJs – a county court judgement is when you’ve owed money to a person or company, and they’ve had to go to the courts to recover the funds. If you’ve had a CCJ but have ‘fully satisfied’ the CCJ, then you may still be able to get a mortgage.
IVAs or debt management plans – if you have taken out an individual voluntary agreement (IVA) to help clear debts, then most lenders may require a larger deposit from you, and a history of keeping up payments on your debt management plan – however, there may be some bad credit mortgage providers that will consider your case.
Bankruptcy – you may still be able to get a mortgage if you’ve been declared bankrupt, however, lenders will need to know when the bankruptcy was discharged, and how any credit has been managed since.
Payday loans – it is still possible to get a mortgage if you’ve had a payday loan, but generally, payday loans are a clear sign of a bad credit rating.

Looking for a commercial mortgage with bad credit? You may be interested in the possibility of shared ownership.

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What are The Criteria for a Commercial Mortgage with Bad Credit?

So you may be wondering what requirements there are for bad credit commercial mortgages. Well, there are several factors that your acceptance for a mortgage will be dependent on, including:

Your Current Financial Status – This is referring to your current income and outgoings which determine your ability to make repayments.
The Deposit – The deposit can vary depending on the structure of the loan and your personal circumstances. A larger minimum deposit is most likely to be required the worse your credit score is.
Profitability – Lenders will take into account your earnings before interest, tax, depreciation and amortization (EBITDA) and are much more likely to provide mortgages to those with higher EBITDA figures.
Business Plan – When overlooking bad credit, the lender may wish to see business plans to get a better sense of security from the deal.
Relevant Industry Experience – The lender may also take into account your experience within the industry that your business operates in. Just like having a good business plan, this gives the lender more confidence that they are going to see a return on their loan.

Having said this, all lenders are different and the requirements between them all can vary quite considerably.

Additionally, their willingness to accept a commercial mortgage application can vary too!

Consider looking at your application from a different perspective and treat it more like a business proposition.

The more profitable and committed you are, the more attractive the application will seem to the lenders.

Non-Status Commercial Mortgages

Another viable but riskier possibility for those seeking bad credit commercial mortgages is to look into non-status commercial mortgages.

Non-status mortgages often do not require a credit check or even necessarily proof of income but the loan is taken out against a commercial property.

This can be good for those with severely adverse credit histories and have explored all avenues but cannot seem to get a commercial mortgage but, they should be seen as a last resort.

The reason for this is not only that your property will be at risk should repayments not be met, but the required deposit and interests rates tend to be significantly higher.

The best route to take would be to explore other options you have first, and the most sensible way to do this would be to speak to an expert commercial mortgage adviser.

This way you can get more information about lenders whose eligibility requirements you can meet.

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Semi-Commercial Mortgages and Development Finance

There are also some who wish to refinance or purchase a property for combined residential and commercial use to drive a rental income.

An example of this would be a pub or bar with rentable rooms.

It is in every way just as possible to acquire a mortgage with bad credit for semi-commercial purposes and similar eligibility requirements, such as verifiable income, loan amount, type of business, etc, still stand.

When it comes to undertaking a building project, on the other hand, development finance is slightly different as a lot more information such as:

Planning Permission.
Material Costs.
Contractor Information.
Duration of the Project.
Associated Building Regulations.
Gross Development.
Exit Strategy.

Development finance deals are still available for those with bad credit and looking for a commercial loan but usually, there will need to be valid reasons for the adverse credit history which can help satisfy the lender’s concerns.

Want a mortgage for a rental property? They work slightly differently to regular residential mortgages, learn all about them in our buy to let mortgages with bad credit.

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How to Find a Bad Credit Commercial Mortgage

Lenders with low-risk thresholds are quite difficult to find if you have an adverse credit history, particularly mainstream lenders that you would find on the high street.

Finding a lender that you will likely fit the eligibility requirements for is not the easiest thing to do on your own.

Our expert mortgage advisors are here to help you find a lender which you can secure a good deal from.

Deals available will be based on your financial situation and so you’ll have a much easier time finding a loan which is best for you.

Give us a call on 03330 90 60 30 to speak to an advisor, or contact us for mortgage advice that’s personal to you and takes your credit history into account.

That way you’ll know where you stand in the commercial mortgage market and we can guide you on your route to securing a suitable loan.

Secured Loan Brokers UK – Compare Secured Loan Fees & Rates

by Dax McLeanPosted on 10th September 2020 | Updated 20th January 2023

If you are a property owner and need to borrow money but bad credit is preventing you from doing so, a secured loan could be the right option for you.

A secured loan can allow you to use your property as collateral, opening up a lot of possibilities for you!

However, secured loans do come with risks and also have some general requirements that must be met before an agreement can be made.

This article will give you information that you need to know about obtaining a secured loan, and how our expert secured loan brokers can help you along the way.

How Does a Secured Loan Broker Work?

The difference between taking out a secured and an unsecured loan is the use of your assets as collateral.

Unsecured loans are also simply known as personal loans and come in two forms:

Opening a line of credit (such as credit or store cards).
Fixed interest loans (such as students loans and personal loans).

To be eligible for unsecured loans, you don’t necessarily have to be a property owner or have a mortgage but they are dependent on your credit rating, and it does usually need to be fairly good.

With that being said, if payments were missed or defaulted under an unsecured loan, the lender is unable to automatically resort to reclamation through property seizure but will have other routes, such as through legal means, to reclaim the money that was borrowed.

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Without the collateral providing security to the lender, an unsecured loan will tend to have higher interest rates than that of a secured loan and missed payments can be more unfavourable as they can incur higher fees and negatively affect your credit rating.

This, in turn, can lead to making it more difficult to obtain credit in the future.

Secured loans (also known as homeowner loans or 2nd charge mortgages) on the other hand, do use the property as collateral and as mentioned above, is a great option for those with a poor credit rating, as the lender has security in the equity of the property being used making it less risky for them.

However, the major risk for you when it comes to this, is that the lender will have legal rights to repossess your home if you have not been keeping up with your repayments. This is doubtlessly a severe consequence for some, so you have to make sure you are certain before taking out a loan against your assets.

Read our complete guide on how do secured loans work?

Types of Secured Loans

There are various types of secured loans available, here are some of the most common:

Second Charge Mortagages

A second charge mortgage also referred to as a secured homeowner loan enables you to use the equity in your home as security for a loan. Essentially, it means you have two mortgages on your home. The equity is the percentage of your property owned by you i.e. the value of your property minus any remaining mortgage.

Buy-to-let

If you have a buy to let property, you could potentially use the equity as security for the loan. This is a common scenario, by which people may fund a new project.

Residential

Are you a regular property owner who wants to secure finance, a secured loans broker may be able to help. Give us a call on 03330 90 60 30 for a no-obligation chat.

Related quick help guides:

Secured Loans Broker – What can they do?

If you decide that you would like to look further into the types of secured loans available and compare what options are best for you, there are two main ways of going about this.

The first is to contact a secured loans broker, like us, whom you will be able to speak to on a personal level and have a conversation regarding what options are available to you.

The other option is to take a look at online comparison websites, which will take into account the offers that are available, giving you a wide array of choices, but it may be more difficult to find something specific for your circumstances.

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It’s much more efficient and easier to speak to a professional who knows exactly what to look for and can tailor a solution that fits your needs.

Searching for a secured loan by yourself is no easy task and, as you may already know, the vast array of choices can be a little overwhelming. Our secured loan experts will be able to effectively filter the options on your behalf, taking most of the work out of your hands and streamline the whole process.

Can I Get a Homeowner Loan with Bad Credit?

In general, the main requirement is that you already have ownership of a property or an existing mortgage and enough equity available to warrant the amount that is being borrowed.

It’s also worth mentioning that a secured loan is an alternative to a further advance if you want to avoid early repayment charges when switching between lenders.

If you are concerned about whether or not you’ll be eligible for a secured loan with bad credit, our experts can help you along the way and will consider credit histories which include the following:

Late payments and defaults.
Low credit score or no credit history.
Mortgage arrears.
Debt management plans.
County Court Judgements (CCJs).
Individual voluntary arrangement (IVA).
Repossession.
Bankruptcy.

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You may also be interested in reading our guide on instalment loans for bad credit.

Secured Loans Broker- what factors are considered?

When taking out a secured loan there will be several considerations to make that a secured loans broker will also want to discuss with you during your conversation. As taking out a homeowner loan is a significant decision to make, it would be wise to know where you stand and think about the following:

Loan Term – This is simply the length of time you want to spend making repayments. The shorter the loan term, the greater the monthly repayments will be but also the lower the interest repaid will be and vice versa.
Interest Rates – The interest rate can depend on several factors including the loan term, the amount borrowed, your credit score and the collateral being offered.
Your Financial Status – When choosing a loan, you should really know where you stand when it comes to your financial situation in regard to what you can afford in repayments and interest. Keep in mind that with your property as collateral, if you are unable to make repayments you may be at risk of losing your home.
Loan to Equity Ratio – The more equity available on your home, you are likely able to borrow more. Equity is the amount of mortgage you have paid from the total value of the property and this is the amount considered recoverable by the lender if you were to default on payments.

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Secured Loans Broker – How Can We Help?

There’s no doubt that homeowner loans are great for those with bad credit but as mentioned previously, taking out a secured home loan is a major life decision that’s not to be taken lightly and nobody should have to make that choice alone!

Give Loanable a call today on 01925 988 055 and they will provide you with the best deals available to meet your circumstances and consider any credit history you may have. With their expert advice, they can guide you through the process and give you the knowledge and confidence it takes to acquire a secured loan that is right for you.

If you have read all the information on secured loans carefully and feel that you want to proceed with a secure loan, get in touch with one of Loanable’s secured loan experts by emailing hello@loanable.co.uk who can work with you to find the best deal for your needs and circumstances.

Further reading:

Shared Ownership Mortgages with Bad Credit

by Dax McLeanPosted on 4th September 2020 | Updated 20th January 2023

It’s common to run into issues when applying for a mortgage, especially in recent years, where there has been significant economic turbulence, that has caused financial difficulties for many, increasing the likelihood of a bad credit score.

Moreover, the banking crisis made mortgage lenders introduce stricter lending criteria and there are various ways of buying a new home.

Shared Ownership is one of them.

Perhaps you have had to declare bankruptcy or missed debt repayments in the past making it a struggle to get onto the property ladder, in which case read on to discover your potential options.

There are many in a similar financial situation to you, preventing them from purchasing a property due to lenders being reluctant to provide mortgages to buyers with bad credit scores.

The reason is, it’s a too high risk for them! And they could potentially lose out.

What is the Shared Ownership Scheme?

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With the shared ownership scheme you can purchase a share of a property in the scenario where you can’t necessarily afford the initial deposit or a mortgage large enough to cover a whole property.

Generally, these shares are either 25%, 50% or 75% of the property.

The other share of the property would be held by a local housing association and this is the portion of the property that you would pay an amount of rent for to the housing association.

This may not seem like the most cost-effective method at first, but remember, this scheme also allows you to acquire a mortgage with bad credit.

Over time you can increase your share on the property from 25% to 50% and then to 75% to finally 100% ownership of the property.

This is the reason why it’s a terrific option for first-time buyers or those looking to get back on the property market after previously owning a property but are struggling because of their credit rating.

Who is Eligible for a Shared Ownership Mortgage?

Those who can take advantage of this opportunity will meet one or more of the requirements listed below:

First-time buyers.
Previous property owners who no longer own a property and are unable to afford the mortgage for a full property.
People who have an annual household income of less than £80,000 (£90,000 in London).
Those who wish to move and already have a mortgage under the shared ownership scheme.

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Shared Ownership Mortgage with Bad Credit?

Even if you meet the criteria listed, it still may not be enough to meet the credit score requirements to get a mortgage.

Lenders can still see your credit history and determine that you are too high risk for a mortgage, particularly high street lenders.

This does, unfortunately, mean that having bad credit can still restrict the mortgage options that are available to you, giving you less choice when it comes to finding a lender.

There are lots of other lenders that may offer a mortgage for clients with previous bad credit.

However, with the easing of restrictions on the financial market over the past several years, there have been many more lenders available that cater to people with bad credit and are able to more freely negotiate a policy which is right for you.

You may find it easier to find a mortgage with bad credit than in the past if you have previously undergone rejection.

If you are struggling and worried about bad credit items on your record, the most sensible approach would be to have a conversation with a specialist mortgage broker.

They will be there to talk you through the process of finding a mortgage with bad credit, discuss your options and also recommend suitable lenders tailored to fit your circumstances. This will give you a clear and easier route to shared ownership than going it alone.

Note: Are you looking for commercial property but have a bad credit history? Bad credit commercial mortgages may be an option for you.

Shared Ownership Mortgage with Bad Credit Considerations

What deposit do I need for a shared ownership mortgage?

Whether or not you will be accepted for a mortgage will depend on your credit score but also it’s important to note that if you are accepted for a mortgage, the deposit can also be changed based on your credit score.

Usually, good credit will mean that only a 5-10% deposit is required at maximum, but this can vary between lenders. However, a bad credit score can see a deposit raise to up to 20% of the property value.

This can depend largely on recent bad items on your credit history, or more severe financial events in your credit history such as having declared bankruptcy, been served a CCJ or experienced a past property repossession.

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What interest will I pay with a shared ownership mortgage if I have bad credit?

You may see quite significant increases in the interest on the mortgage loan, especially if the deposit being offered is no higher than what has been asked for by the lender.

This is an issue that would need to be discussed with a mortgage broker as the interest heavily depends on the amount that is being loaned, the amount in repayments and your credit score.

Credit Report Discrepancies

Don’t just rely on others to tell you that you have a bad credit history, it’s always smart to obtain a copy of your up to date credit report so that you are always in the know when it comes to your credit history.

When you go to speak to lenders, always bring a copy of the credit report with you so that when explaining anything in your credit history that comes into question, you have a point of reference and a clear understanding of where you stand.

You can obtain a copy of your credit report through credit reference providers such as Call Credit, Experian, Equifax and others.

Want a mortgage for a rental property? They work slightly differently to regular residential mortgages, learn all about them in our buy to let mortgages with bad credit.

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Is a Shared Ownership Mortgage the Right Choice?

Ultimately, the decision is yours to make.

Having a bad credit score due to previous financial events is not the ideal situation, but if you want to get into property ownership, or return to property ownership, then the truth is, a shared ownership mortgage is a viable option for many.

If you still have questions about your situation or shared ownership mortgages, then get in touch with us today to talk to a professional mortgage broker, who will help make your path to homeownership and help map out the journey, even if you have a bad credit history.