FAQ’s
Your questions answered here
We Offer Loans of £75k – £1m, with up to 90% Max LTV and Funds Released within 7 Days
How long will it all take?
Our involvement in the process is minimal, and our underwriting involves a zoom call with you, the borrower, to run through the plans to the property, and a survey. This can usually be arranged very quickly. Everything else depends on the speed at which your solicitors and the vendor’s solicitors work. A good rule of thumb would be to allow around 4 weeks for the transaction to complete, but as each property transaction is different, there are always factors that can be out of everyone’s control, and a requirement for the vendor and their solicitor to be willing to move quickly.
Where can my deposit come from?
Your deposit can come from any legal source, that passes a simple sensibility check.
Can you do serviced interest?
We only offer retained interest. This means there are no monthly payments, and the interest for the full loan is deducted from the advance on completion. You pay the interest back, along with the loan balance at the end of the loan term, when you settle the Bridging Loan.
Do you lend on land or commercial property?
We are residential property only, so unfortunately cannot lend on a plot of land, or a fully commercial premises
Do you lend to borrowers with adverse credit history?
We can consider credit issues, where there is an explanation, and it does not affect the exit of the Bridge. We may require confirmation that you can qualify for and exit onto a buy-to-let mortgage, if needed.
Where can I find your full lending criteria?
Our comprehensive lending criteria, including loan-to-value, min & max term, and a breakdown of our requirements can be found in our Lending Criteria Guide which you can access by clicking here.
Is there an application fee?
We have an arrangement fee of 0.5%.
Apex Bridging Verified Client Testimonials
Call Us Today to Discuss Your Loan Requirements
01509 345 007
Basics / Fundamentals
What is a bridging loan?
A bridging loan is a short-term loan, secured against a property.
Commonly used for speed of transaction – maybe due to auction conditions or the property is not mortgageable in its current state. A Bridging Loan provides the financing and time to maximise the potential of the property before then either selling it on or taking out a standard mortgage product.
What is / who is a vendor?
A vendor is simply the person who owns and is selling the property.
What does BMV stand for / what does below market value mean?
BMV stands for ‘below market value’. It means that the vendor is prepared to sell the property for less than it would be worth on the open market. This is normally done for speed or to remove the hassle of the property selling process.
What is LTV / Loan to Value?
Loan to value (LTV) is simply how much can be lent against the full value of the property.
E.g. If a property is worth £100,000, and has a £50,000 loan secured against it, the LTV would be 50%.
What is OMV / On Market Value?
This is the value of a property in its current state. A surveyor will value the property and use evidence of what similar properties nearby have sold for to confirm the OMV.
What is a property investor?
A person looking to purchase investment property – i.e. they purchase property that they do not intend to live in themselves, but rather purchase to refurbish and sell on at a profit, or let the property out to tenants, and generate an income from the rental payments.
Bridging Loans
Why should I consider taking out a bridging loan?
A bridging loan is a tool for property investment. Should you need to do work to refurbish a property, which in turn will increase the end value, a bridge is a perfect solution.
The way standard mortgages are structured, you can’t buy, refurbish and immediately have access to the capital tied to the higher end-value. Bridging loans offer you the flexibility to make use of that increase in value, as soon as the increase occurs either upon Sale of the property or refinancing based on that higher value.
How much do bridging loans cost?
Like any specialist product, the cost will depend on a number of factors relating to the project itself. How much of your own money you are putting in is key, the nature of the project itself and the size of the loan needed are also important factors, along with any quirks or complexities relating to the property or the borrower.
Bridging loans are short term products, so interest is charged monthly, rather than annually. Expect rates to range anywhere from 0.5% - 2% per month, depending on the nature of the project.
Are bridging loans legal?
Yes 100%, and a common tool used by investors around the world to profit in the property market.
Are bridging loans risky?
There is more risk to consider with a bridging loan. There are tighter time constraints, and usually the borrower will be carrying out work to the property, which can take longer or cost more than first estimated. There is also a risk of the finished property not selling or refinancing at the expected value.
To manage these risks always ensure you have a feasible exit lined up before even entering the loan; allow extra costs and time for contingencies, or dealing with unexpected problems or delays; and always communicate with the lender if problems do arise to ensure a workable strategy can be put in place, if needed. To mitigate against a property not selling, always ensure you have a back-up option of refinance onto a mortgage if needed.
Whilst there are increased risks, with appropriate planning and research, these can be managed and mitigated.
What are the advantages of a bridging loan over any other kind of loan?
- Money is available quickly (weeks) rather than (months) on a standard mortgage.
- The property being purchased does not need to be in a habitable condition.
- They are flexible, and usually do not tie you in with penalties.
- They can be arranged in a bespoke manner, specific to your project.
- There is no need for income and outgoings to be assessed as there are no monthly payments making financing easier where you have complex income.
- Previous credit blips or past problems are less of an issue.
What are the disadvantages of a bridging loan over any other kind of loan?
- They are a more expensive form of lending than a mortgage.
- There is risk to consider – if the property doesn’t sell, or the project takes longer or costs more than initially expected.
- There are tighter time pressures to get the work done and exit the loan.
- They are an investment tool usually to transition a property from its current state to a future, more valuable state. They should not be used as an alternative to a mortgage.
Are bridging loans new?
Not at all. Bridging loans have been around in the UK since the 1960s, and are widely used around the world.
They have become much more popular and widely used in recent years, particularly in times of wider economic financial crisis to enable property to be purchased quickly, and particularly to refurbish uninhabitable property.
Who provides bridging loans?
Some Banks and Building Societies offer bridging loans. There is also a large number of Specialist Lenders who have a strong focus or expertise in the property investment market, or commercial lending who offer bridging loan products.
Are bridging loan companies regulated?
Some bridging loans are regulated – these are loans where the borrower is purchasing or refinancing their main residence, or the home of any immediate family member.
Apex Bridging, like the majority of bridging providers, see bridging loans primarily as a property investment tool and do not lend against a borrower’s main residence.
Similar to a buy-to-let mortgage, a bridging loan to purchase investment property is not regulated by the FCA. As such, all bridging loans we offer are unregulated.
Process
How do you use a bridging loan when buying a property?
A bridging loan is primarily used to fund the purchase. For example, if you are buying a property for £200k, you may take out a bridging loan for £150k, and use £50k of your own money for the deposit.
How the bridging loan is used is much the same as with a long-term mortgage.
Can anyone get a bridging loan?
Yes. But as with any lending it will be subject to a lenders criteria.
It is easier with some lenders to obtain finance if you own your own residential property, or another investment property, or if you have experience in refurbishing property. But none of these conditions prevent anyone obtaining bridging finance, due to the wide variety of lenders available.
Apex bridging do not apply these conditions, and because there are no monthly payments as interest and fees are payable on redemption. Apex are comfortable with adverse credit if there is an explanation, and it does not prevent the borrower exiting the loan.
What is the process of getting a bridging loan for a property purchase?
Every lender has a slightly different process and requirements. Primarily they will look to get comfortable with the property values and that the project will make money for the borrower, and the borrower has the relevant skills or support / plan to ensure the project is a success.
At Apex we have a very straightforward process. Once you have made an enquiry, we will look at the property, its purchase price, the cost of the works required, and its end value and satisfy ourselves that the project has promise and will make you, the borrower, profit.
Once your offer is accepted, submit a simple application form with basic documents, mostly confirming identity. We then arrange a video call with you, where you and the underwriter will have an informal chat about the project and talk through in a bit of detail how everything will work. A survey is then instructed. Once the survey is returned, presuming there are no unexpected problems highlighted by the surveyor, the case is formally offered and passed to solicitors to complete the purchase.
How long does it take to get a bridging loan?
From start to finish it is the length of time it would take for you to do a half-hour video call with the underwriter, a Surveyor to visit the property and submit a valuation, and your solicitor to complete the legal work.
This can happen very quickly, and we have seen cases run from application to completion in a week or two.
It can be common however for surveyors or solicitors to be the slower part of the process, so the average time from start-to-finish would be around 3-4 weeks.
What kind of collateral / security do I need for a bridging loan?
Bridging loans can be arranged on anything from a plot of land, to a fully finished property, and everything in between.
The most common security is any residential property in need of some work, which will allow it to increase its value. The work needed could be straightforward, such as a new kitchen, bathroom, and some cosmetic work, or it could be extensive, such as gutting and completely refurbishing large areas of the house.
Extensions and conversions are also common – for example converting a commercial premises into flats, or adding a double-storey extension onto a house. For these you would need all relevant planning and permissions in place prior to the loan completing.
How long do you typically take a bridging loan out for?
Anywhere from 3 – 18 months depending on the project.
You need enough time to carry out work to the property, and then exit (either by selling or refinancing onto a long-term mortgage). For a light refurbishment, typically allow around 3 months for the work to be completed, for heavier or structural work, 6-9 months is more common. Add another 3-6 months to both to then exit the loan.
As such a good rule of thumb would be to take out a 9 month loan for a light refurb, and a 12 month loan for a heavier refurb. And for a major project consider up to 18 months.
What happens if you can't pay back the loan in the specified period?
Always allow yourself more time than what you think you need to exit the bridging loan, to allow for contingencies, or a housing market that slows. If you do run into problems towards the end of the term, always communicate with the lender, to allow them to set up a plan that works for you to adjust timescales.
If you are communicating and explaining any problems, most bridging lenders will set up an agreement with you to ‘service’ the interest past the end of the loan term (i.e. make monthly payments to avoid the additional interest escalating). You will also have the option of refinancing to another bridging lender, and taking out a new term to complete the project, although both will incur some additional costs and charges, so it will always be safer to set your initial bridging loan term cautiously, with more time than you think you need to allow for the unforeseen.
Property
What types of properties do investors buy?
Any residential property works.
It’s worth considering that apartments / flats are generally more difficult to refurbish and add value than houses. The fact that the freeholder owns and is responsible for the building, and also that freeholder permission is often needed for a lot of proposed work, can make flats more difficult to add value to.
Properties that need a little bit of work normally offer the best profits to investors, where it is usual for the cost of the work to be less than the increase in value. The investor then gets the double benefit of regular rental income on a property that is worth more than they paid for it.
Of course, if you can purchase a property at below-market-value, that’s generally the best investment of all, as it will automatically increase in value without you having to do anything!
How do you build a property portfolio?
In simple terms by buying a number of properties. In practical terms, presuming you don’t have a huge pot of money to buy properties outright, the most common way would be to look out for properties where value can be added. Purchase the property using a bridging loan, do the work to add the value, then refinance onto a buy-to-let mortgage, releasing capital from the increased value, which acts as a deposit for the next property. And repeat.
e.g Mrs Smith has £65k of capital.
She buys a property worth £150k with a 25% deposit of £37,500
She spends £27,500 refurbing the property
After the work the property is then worth £250k.
She refinances onto a buy-to-let mortgage at 75% of the new value of £250k, giving her a new mortgage of £187,500.
£112,500 is used to pay back the bridging loan, leaving her with £75,000 to invest in the second property.
Are there any tax implications from taking out a bridging loan?
There is no difference in tax implications in taking out a bridging loan as opposed to a long-term mortgage. For any personal or specific questions, always speak to an Accountant or Tax Adviser.
What are the tax implications of building a property portfolio?
There can be implications in terms of additional income tax from rental income, and capital gains tax from increased profit from property, but you should always seek advice from an Accountant or Tax Adviser to see how these might affect you. In particular, seek advice as to whether purchasing the property in your personal name, or in a Ltd Co name would be best for you.
What are the advantages of building a property portfolio?
Primarily as a source of additional income from the rental payments made by tenants. Over time, the rent you can charge and the value of the property are both expected to go up. This can increase income levels and give access to additional equity, in addition to having background long term investments for yourself/ your family.
How do investors fund property purchases (with or without a bridging loan)?
A property in good condition, being bought at Market Value, can be purchased using a standard buy-to-let mortgage.
Some investors team-up, and do Joint Venture projects, where they pool their money and go in together, splitting the profit on completion.
Some have large amounts of available cash, where they don’t need funding.
Most require the use of financing, typically a bridging loan in the first instance, where there is an opportunity to increase the value of a property in a fairly short space of time.
Contact Details
Address
T/A Apex Bridging Loans
1 The Cornerstone
Market Place
Kegworth
DE74 2EE
Company Number 08548882
