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Error: Yearly income income must be between £1 and £10,000,000.
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Based on your yearly income,
you may be able to borrow
Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.
Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.
Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.
Can I Get a Bridging Loan with an Adverse Credit History?
Secure bridging finance is a flexible short-term borrowing option. It is usually available in most bad credit situations, provided you have a stable way to repay the loan, called your exit strategy.
In this guide, our mortgage advisors team explains how credit reports impact your ability to get a bridging loan and what criteria lenders will consider.
What Bad Credit Issues are Acceptable for a Bridge Loan Application?
The essential factor to remember with a bridging loan is that it is only short-term, and the interest rates are higher than on a mortgage. You usually only pay interest during the term and need an exit strategy to demonstrate how you will pay back the borrowing.
Therefore, bad credit is less of an issue, provided you have a robust repayment plan.
For example, if you plan to remortgage, you might need an agreement in principle since the lender can't be sure whether you will be approved for the mortgage given your bad credit history.
However, if you sell the property or have another viable solution, a bridging lender is more likely to accept your application.
There are bridging loan options available in most bad credit scenarios, from having no credit history through to having repossessions or bankruptcy on your credit report. A lot depends on when the issues occurred, how much money was involved, and how long you have kept your financial affairs in order.
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Do I Have to Have a Credit Check to Get a Bridging Loan?
Yes, you do. Just as with a mortgage, a lender must run a credit check before lending you the cash. However, bridge lenders take a different approach.
Most high street mortgage providers will consider your credit score and decide whether to lend on that basis. Bridge lenders are more likely to consider the merit of your application on a case-by-case basis.
That said, having a clean credit history will make your application more attractive, and you will likely be offered more favourable interest rates.
Lenders will also consider:
- The strength of your exit strategy
- What property you wish to buy
- Your business plan if you are applying for a commercial bridge loan
- How experienced you are in developments if the bridge is for a renovation project
- What deposit you have available
How Important is my Bridging Loan Exit Strategy if I Have Bad Credit?
The exit strategy is of paramount importance for any bridge loan application, and even more so if you have bad credit.
Lenders need to know how you will pay back the borrowing after the shorter term, and so if you are reliant on being approved for a further loan, they are unlikely to help.
Some exit strategies are widely accepted, and others are more unusual and will require further inspection.
For example, using inheritance, endowment, or investment is non-standard and will require an independent broker to negotiate terms to demonstrate that the exit strategy is sound.
What are the Other Criteria for a Bad Credit Bridging Loan?
As well as your credit file and your exit strategy, bridging loan lenders will look at:
- The property's security - either in the one you are buying or in an existing property or another asset. If you can show that you would be easily able to cover the loan's cost by selling that asset and offer security against it, the lender will be more likely to approve the loan.
- Development experience - many bridge loans are taken out to invest in development or auction property requiring renovation. In this situation, the lender will be happier to approve the bridge if you have previous experience in similar projects.
- Deposit - most bridging finance providers, need a deposit of 30% to 35% as a minimum. The higher deposit you can offer, the lower the lender's risk.
Is it Possible to Get a Second or Third Charge Bridge Loan in an Adverse Credit Situation?
Second charge bridge loans are already a higher risk than a first charge, and you will have a smaller pool of lenders to choose from if you also have credit problems.
This bridging loan is a specialist product, so you should consult an experienced bridging finance broker to have the best chances of approval.
Third charge loans are even less common and difficult to come by with bad credit.
Can I Get a Commercial Bad Credit Bridging Loan?
Businesses can have bad credit just as individuals can. So if you need a bridging loan in this situation, you will usually need to apply to a specialist bad credit lender with a broker to secure the terms.
You can also lower the risk by offering more security, a higher deposit, or personal guarantees from the business directors.
Are bad Credit Bridge Loans Available on any Property Types?
One of the most common reasons for applying for a bridge loan rather than a mortgage is that you can use it for any purpose.
Therefore, a bridge loan is available to buy an auction property or an uninhabitable property that wouldn’t be eligible or a mortgage.
However, those riskier properties are harder to secure a bridge loan against with bad credit, so whole-of-market advice is crucial.
Are There Bridge to Let Bad Credit Agreements?
Bridge to let is a type of loan used to purchase a buy to let property. Most bridging lenders will need to see an agreement in principle to approve this application or assess the merit of the mortgage application themselves if they offer both types of loans.
You can get a bridge to let in a bad credit situation, provided you meet the other lender's criteria.
What is a Non-Status Bridging Loan?
Non-status bridge loans are secured against a specific asset and usually carry high-interest rates. They are generally not recommended unless you have no other borrowing options since your costs will be high.
Can I Get a Bridging Loan if I Have Been Blacklisted?
Being blacklisted doesn't exist - just because one lender refuses your application doesn't mean another won't be happy to approve it.
You'll usually not be able to apply to the same lender with whom you have had defaults, for example, but a niche provider is a different story.
A bridge loan is a short-term, interest-only secured loan. They are more flexible than mortgages but do charge higher rates of interest.
You will need to have an exit strategy to show how you will repay the loan, usually through the sale or remortgaging of the property.
There can be, yes. Bridge loans are very fast to arrange, so they are ideal for auction purchases, for example. They are a bridge to close the gap between requiring finance and securing a longer-term loan.
There aren't any specific caps, so the maximum you can borrow will depend on your exit strategy's strength.
Yes, if you are taking out the loan against a residential property that is your primary home. The FCA regulates home loans with rules about advice and selling. Commercial bridge loans are unregulated, and therefore a bespoke borrowing product.
Closed bridge finance has a finite end date and is cheaper in terms of interest, but it does mean you must be confident when you will pay back the loan. Open bridge loans are more flexible.
There are three options:
- Monthly interest, where you pay the interest element every month.
- Rolled interest, where it is compounded into the total repayable at the end of the term.
- Retained interest, where the interest payable is borrowed by the lender and the total agreed at the loan term's start.
This form of lending is only intended to be short term. Most loans need to be repaid within a year, although you can negotiate deals up to two or even three years.
If you're interested in a bridging loan and have a bad credit history, you must work with a broker who can analyse the deals and the lender criteria on the market to give you the best chance of finding a competitive loan.
Give the Revolution team a call on 0330 304 3040 or email us at [email protected] to get started!
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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.
We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.