Loan to Valuation Ratio (LVR)
At Heritage, our allowed maximum LVR on bridging loans is normally 72%. For the definition of LVR or to learn more about common banking terminology, check out our article on Breaking Down Banking Jargon.
Then, can I borrow more with bridging loan?
A bridging loan can allow you to borrow up to 100% of the purchase price of your new property, plus the associated costs.
Regarding this, do HSBC offer bridging loans?
We are often asked whether HSBC do bridging loans. The answer is they do offer residential bridging loans, assuming they already arrange the mortgage for your existing property. If this is not the case, or if you’re seeking a commercial bridging loan, you’ll need to look into the alternative lending market.
Do I need proof of income for a bridging loan?
No, the majority of bridging lenders do not require proof of income.
Deposit requirements for residential bridging loans are usually higher than they are for mortgages. The minimum a lender would usually expect you to put down is 30-35% of the property’s value.
Interest on bridging loans is more than the interest on our standard term loans. You’ll have the extra cost and stress of having to repay two mortgages at once. It may force you into selling your original property at a lower price if you need the money to meet your loan payments.
Sound finances: To be approved for a bridge loan typically requires strong credit and stable finances. Lenders may set minimum credit scores and debt-to-income ratios. Generally speaking, if your financial situation is shaky, it could be difficult to get a bridge loan.
Bridge Loan Costs
Bridge loan interest rates depend on your creditworthiness and the size of the loan but generally range from the prime rate—currently 3.25%—to 8.5% or 10.5%. Interest rates for business bridge loans are even higher and typically range from 15% to 24%.
Both asset refinancing and invoice finance can be put in place quickly and can provide a cheaper alternative to bridging finance. Other alternatives include development finance, commercial loans, secured loans, commercial mortgages and asset loans.
Bridging lenders typically require collateral in the form of property. Loans can be secured on the value of one property for several combined properties. The lender and borrower will enter into an agreement whereby the service provider takes ownership of the property in the event that the loan is not repaid as agreed.
Bridging loans can be an expensive way to borrow money. That’s because bridge loan rates tend to be pretty high and are often calculated on a monthly basis, rather than an annual basis. They could range from around 0.4% to 2%. Unlike a mortgage, bridge loans don’t last very long.