Every bridging loan is unique, with bespoke terms and conditions agreed between the issuer and the borrower. From maximum loan values to repayment terms to interest rates and LTVs, all aspects of the agreement are tailored to meet the customer’s requirements.
Most bridging loan specialists cap their maximum LTVs at around 85%. This means that if you were planning to purchase a property valued at £200,000, you could request a maximum of £170,000 and would need to come up with the remaining £30,000 as a deposit.
But is there a way of arranging a 100% loan-to-value bridging loan? If you would prefer not to tie any of your own money up in the purchase, do lenders ever offer 100% LTV bridging finance?
The short answer is yes but as is always the case, terms and conditions apply. In addition, there are certain risks that need to be taken into account with 100% LTV bridging loans.
Stricter qualification criteria
All bridging loan applications are assessed by way of their overall merit. This means that your suitability for 100% LTV bridging finance will be determined by the strength of your application.
Qualifying for a 100% LTV loan means presenting the most convincing case possible to your lender; if you wish to borrow more than the usual 85% maximum LTV, you will need to meet the following requirements:
- A flawless recent credit history with no missed payments, defaults, or a history of bankruptcy
- Evidence of a proven track record in the field for which you intend to borrow the money
- Proof of a bulletproof exit strategy that eliminates the risk of non-repayment
- Provision of assets of sufficient value to comfortably cover the costs of the loan
The most important of the above is security – aka collateral. Bridging finance is always secured against assets of value, such as a home or business property.
This alone could determine whether or not you are eligible for a 100% LTV product.
Using the example above, bridging finance for a £200,000 property may typically be limited to £170,000 – 85% LTV. But if the value of the asset you use as security for the loan is £300,000, your lender may demonstrate greater flexibility.
Ultimately, the lender needs to be confident that they will get their money back in full, irrespective of the outcome. Hence, the higher the value of the assets you provide ad security, the more likely you are to qualify for a 100% LTV loan.
What Are the Downsides of 100% LTV Bridge Finance?
As a general rule of thumb, the higher the value and LTV of any kind of loan, the greater the risk level.
With a 100% LTV bridging loan, the biggest risk you face is the loss of a high-value asset. If you are unable to fulfil your side of the agreement for any reason, your lender could take possession of your asset(s) and sell it to recoup their losses.
In addition, high-value bridging finance usually attaches higher overall borrowing costs. The more you borrow, the more you can expect to pay by way of interest and general service fees.
Do Lenders Offer Bridging Loans at 85% or 90% LTV?
Yes – bridging loans at 85% and 90% LTV are broadly available, issued under the same terms and conditions as all other bridging loans. Although as a general rule of thumb, the larger the ‘deposit’ on a bridging loan (i.e. the lower the LTV), the easier it becomes to qualify.
If you are interested in taking out a high LTV bridging loan, the best thing to do is consult with an experienced broker or provider at an early stage. During which, they will present you with an overview of the options available, including the various types of bridging finance that may be suitable for your needs.