How to get a £1 million pound bridging loan

£1 million pound bridging loan
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    The UK property market is fast-paced, and getting the right finance can make the difference between nailing a lucrative opportunity and watching it slip away. That is why many investors use a bridging loan to secure a deal fast. If you’re looking for a bridging loan in excess of £1m, lenders tend to have more stringent lender requirements. That said, it can also open the door to potentially better deals and more favourable terms, especially with a low loan-to-value ratio.

    Loan-to-Value (LTV) ratio significantly impacts your chances of securing a £1 million bridging loan; a lower LTV indicates less risk to the lender, improving your approval odds, while a higher LTV can make lenders more cautious, potentially requiring additional security or higher interest rates.

    In this blog, we’ll arm you with the knowledge and confidence to secure a £1million+ bridging loan to turn your property ambitions into a profitable reality. We will cover the key aspects of getting a large bridging loan, including the maximum amount you can borrow, the typical monthly interest rate, the application process, and the additional costs attached to a large bridging loan.

    Whether you’re looking to refurbish, develop, or expand your portfolio, understanding how to secure large bridging finance quickly can be the key to unlocking your next big investment. Contact the experts at One to access a network of bridging loan experts who can match you with specialist lenders comfortable with large bridging loans.

    What is the maximum amount for a bridging loan?

    This is a much-asked question, and the answer is that there isn’t a strict upper limit.

    Bridging loans range from as little as £25,000 to several million pounds, depending on the LTV ratio, the value of the property being used as security, the lender’s creditworthiness, and their exit strategy. High-value bridging loans, often referred to as “large bridging loans,” can reach £50 million or more, especially for significant property transactions or commercial developments.

    How loan-to-value affects the maximum loan amount

    For large bridging loans, the LTV ratio plays a crucial role in determining the maximum loan amount a lender is willing to offer. Most lenders consider LTV ratios ranging from 50% to 75%, although some may go to 80% for highly desirable properties or borrowers with strong financial profiles (but not very often).

    A lower LTV ratio means you will have to provide a larger deposit or security property, reducing the lender’s risk. A higher LTV gives you access to much better deals with less upfront capital, but it’s likely you’ll encounter higher interest rates and fees.

    How easy is getting a bridge for 1-2m pounds?

    Securing a bridging loan of £1-2 million can be relatively straightforward, provided certain conditions are met.

    1. LTV Ratio: As discussed above.
    2. A clear exit strategy: This is how you propose to pay back the loan, e.g., the sale of the investment property or refinancing with a traditional mortgage.
    3. Creditworthiness: While bridging loan lenders are more lenient than other lenders regarding credit history, a strong credit score can definitely help, especially when it comes to negotiating terms.
    4. The borrower’s experience: Borrowers with experience in property development or investment may find it easier to secure larger bridging loans.
    5. Relationship with the lender: A good relationship with bridging lenders can be advantageous, which is why using a specialist bridging loan broker is a wise move.
    6. Accurate documentation: Having the necessary documentation, including property details, proof of funds, and a comprehensive business plan, can expedite the approval process.

    How to apply for large bridging loans

    To get a bridging loan, preparation is crucial. Let’s take a look at six key steps in the process:

    1. Get your paperwork in order

    Put together a business plan detailing the precise amount you need to borrow and how you will pay it back, showing calculations. While it may seem premature, outlining your strategy for repaying the loan is essential for both you and the prospective lender, especially when seeking a considerable sum such as £1m.

    Brokers are skilled at presenting applications in a way that lenders like to see, and so can really speed up the process.

    2. Find the right lender

    A reputable broker can connect you with suitable specialist lenders whose lending criteria you fit. They have relationships with multiple lenders and can quickly find the best terms. At One, we can put you in touch with a bridging loan broker who can help you steer through the process and pinpoint the right lender for you.

    If you decide to go it alone, be sure to do your homework to compare deals and rates. Consider attending property and finance industry events for networking opportunities, seek referrals from other property investors or financial advisors, and look at loan comparison websites

    3. Define your exit strategy

    To demonstrate the ability to repay a large bridging loan, it is important to have a clear exit strategy, such as selling the property or refinancing with a long-term mortgage.

    For more useful info on exit strategies, see our blog article.

    4. Provide collateral

    Bridging finance is a type of secured loan, so you will need to offer collateral, usually property. The security property value should meet or exceed the loan amount to minimise the lender’s risk. Providing accurate property valuations and proof of ownership is essential; lenders will usually request an independent valuation.

    5. Negotiate terms

    Bridging lenders tend to be more flexible than other lenders in that they are open to discussing loan interest rates. Again, the help of a broker can really help. They can leverage their working relationships with lenders and knowledge of the market to secure better terms. They also know precisely how to emphasise your strengths to negotiate lower interest rates.

    6. Finalising the loan agreement

    This is a pretty standard process and requires a legal team experienced in handling high-value bridging finance transactions. Carefully review the contract before signing: it’s essential to fully understand the loan terms and your obligations. Once the contract is signed, funds are typically released in a few days.

    What information do lenders look at for a £1 million bridging loan?

    Lenders usually ask for documentation, including proof of income, assets and liabilities.

    They may look at your credit history, and will most certainly examine your debt-to-income ratio and security property value. You will also be asked to submit a detailed business plan outlining the loan’s purpose, repayment strategy, and exit plan.

    What to consider before getting a large bridging loan

    If you’ve done your homework, put together a strong business proposal, got your deposit in place and are aware of how LTV will affect your chances of securing a large bridging loan, then you’re almost ready to go. But before you take the leap, consider the additional costs involved, like interest and fees:

    Loan interest rates

    Bridging loan interest rates can vary depending on factors such as the lender, loan amount, loan-to-value ratio, your creditworthiness, and the loan term. Generally, interest rates for bridging loans tend to be higher than those for traditional mortgages, typically ranging from 0.5% to 2% per month, which equates to an annual interest rate of 6% to 24%. Unlike a traditional mortgage, bridging loan interest is calculated on a monthly basis.

    There are several ways to pay interest on a bridge loan. You can opt to pay the interest monthly or “roll up” the interest, which is added to the loan balance and paid in full at the end of the loan term. Another option is to “retain” the interest, which involves the lender withholding a portion of the loan to cover the interest payments and releasing the remaining funds.

    Bridging loan fees

    There are a number of fees to factor in when taking a bridging loan of any size, including:

    • Arrangement fees (sometimes called administration fees): Some bridging lenders charge these fees to cover the costs associated with setting up the loan.
    • Broker fees: If a broker arranges your loan, they will charge a pre-agreed percentage of the loan amount.
    • Valuation fees: Paid to an independent surveyor.
    • Legal fees: Both the lender’s and the borrower’s legal fees need to be covered.
    • Exit fee: Some lenders charge an exit fee when the loan is repaid, which can be around 1% of the loan amount.
    • Early repayment charges: If you repay the loan early, there might be a penalty fee, although not all bridging loans have this charge.

    To learn more about bridging fees, check out our blog.

    Looking for large bridging finance? Contact One

    We hope you’ve found this guide on how to get a 1 million pound bridging loan helpful. If you think that your circumstances make you a good candidate for a large bridge loan but are not sure what to do next, then get in touch with One.

    We have access to a wide network of specialist large bridging loan brokers who are poised to help. They can use their extensive knowledge of the market to find the best deal available to you with the most competitive monthly interest rate. Your broker will also take care of the application process, saving you serious time and energy.

    Contact us today to get started.

    Picture of Mark Piper
    Mark Piper

    Mark is the senior advisor at One Commercial Loans and has a wealth of experience in bridging and property finance.

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