Frequently Asked Questions
Bridging Loan Frequently Asked Questions
What is a bridging loan?
A bridging loan is a short term non-status loan that enables borrowers to make an application to a lender with the comfort of not having to provide income to support the application – for affordability. Instead, the lender takes a charge over a property as security and typically retains the interest over the term (time) of the loan.
Why should I use bridging loan?
You could use a bridging loan if you are a property developer, property investor or simply an owner occupier. Borrowers use bridging loans for property development, refurbishing a property, acquiring land – before planning is granted, downsizing home, purchasing at a property auction, helping with probate or simply raising capital and releasing equity. There are so many uses when using a bridging loan and a few can be found on our bridging loan page.
How is interest paid?
Typically, interest is rolled-up and retained. As a borrower, this means that the longer you require the bridging loan for, the net loan reduces accordingly.
How long can I keep the loan for?
A bridging loan term (length of the loan) is typically 12-18 months. However, if you have enough equity in the property there are bridging loan lenders that will take a term to 60 months.
What are Madison Carter Finance Bridging Loans Fees?
Typically, Madison Carter Finance Bridging Loans fees are wrapped up in the arrangement fee. If not, Madison Carter Finance charge 1-2% of the loan.
What is the difference between a Regulated & Unregulated Bridging Loan?
Regulated Bridging Loan: A regulated bridging loan is subject to regulatory protections and oversight by the regulation. Typically, this type of loan is used when the borrower is an individual or a partnership of individuals, and the loan is secured against their primary residence or a property they intend to live in. Regulated bridging loans fall under consumer protection laws, which means that the lender must adhere to certain rules and guidelines to ensure that the borrower is treated fairly. This may include providing clear terms, disclosing costs, and ensuring affordability checks are conducted.
Unregulated Bridging Loan: An unregulated bridging loan is not subject to the same level of regulatory oversight. It is typically used by businesses, property developers, or investors for commercial purposes. These loans are often secured against non-residential properties or properties that are not intended to be the borrower’s primary residence. Since they are considered commercial transactions, unregulated bridging loans are exempt from some of the consumer protection regulations that apply to regulated loans. Borrowers in these cases are generally expected to have a certain level of financial expertise and understanding of the risks involved. If a borrower is raising funds for business purposes, their primary residence can be used for a second charge bridging loan.
Will I require a proof of income?
A bridging loan is a non status loan, meaning no income is required. This allows borrowers to borrow up to 85% maximum of the property value (LTV).
What documents will I be required to provide?
The documents required for a bridging loan are typically:
- An up to date credit file
- Passport and / or driving licence
- Personal bank statement, dated within the last 3 months
If you are a property developer:
- CV and an application form. CV will be only required for property developers
- Assets & Liability (A&L) Summary
On occasion, this can differ.
Can I purchase land with a bridging loan?
Yes. Bridging loans for land can be used but are restrictive, typically, to 60% LTV. The borrower must have a strong exit strategy, if planning does not work out as initially thought.
Do bridging loan lenders accept any adverse credit including CCJ's etc?
This can be considered and for Madison Carter Finance Bridging Loans this would be on a case by case basis.
On what basis do I engage Madison Carter Finance Bridging Loans?
Madison Carter Finance Bridging Loans work on an exclusive basis. Check term 1.5.
Will I pay VAT on Madison Carter Finance's fees?
VAT is exempt for financial services in the UK. Thus, there will be no Value Added Tax added to Madison Carter Finance’s fees.