Things You Need to Provide for Taking Out a Bridging Loan
A bridging loan is a type of short term loan that is becoming more and more popular among property investors and developers in the UK. When you are looking for bridging finance, you may come across a number of lenders with hundreds of pages on the process of lending and why you should take a loan from them. But there is very little information on what a borrower needs to prepare while enquiring for a bridging loan. However, underwriters do most of the paperwork, and there are some details that you have to provide as a borrower.
When providing bridging loans, lenders should keep the process simple for the borrowers. In this article, we will describe the things that you need to provide for taking out a bridging loan:
To make it easy to understand, we break down the loan into four categories, including borrowers, property, loan purpose, and exit strategy.
The Borrower
Almost all lenders want to know a little bit more about the borrowers before granting a loan. For this purpose, you have to provide photos of your passport, proof of your address (tax bills or utility bills), and 3 or 6 months’ bank statements. You can provide all these documents through email.
The Property
Property is the crucial reason for the loan, so you have to provide the documents of the property you are going to purchase. You need to describe the type of property and for which purpose it is currently being used. General documents that you need to provide are as follows:
- Redemption statement that is required to determine the loan to value. It is essential for the borrowers who are taking the 2nd charge bridging loan.
- The purchase contract is required if you are taking out a loan to purchase a new property. It is evident for the amount requested on the loan.
- If the borrower is a private landlord or member of the housing association, then a copy of Assured Short hold Tenancy is required. Lenders need it to determine the length of tenancy and to know whether it’s your tenant’s central accommodation or not.
- If you want to take out a loan for the commercial property, you have to provide lease documents so that the lenders know how many years are left on the lease. It also provides knowledge about the current rental income from this asset.
Additionally, some bridging loan providers can ask for the valuation report and the reason for the loan.
Reason for The Loan
You have to provide the reason for borrowing that you are taking out a loan for new property purchase, refurbishment, or investing in property for a business purpose.
The Exit Strategy
It is an essential thing that lenders require to grant a bridging loan. An exit strategy will give lenders an idea about how a borrower will repay the loan amount. The way the borrower uses to repay the loan amount determines the evidence you need to provide to your lender.
If you decide to take out a bridging loan, we suggest you shop around and compare quotes from different providers. There are online comparison websites, such as short-term, providing a comparison on different financial products such as short-term insurances, bridging loans, and short-term loans. You can compare different companies and select the best one without wasting your time and energy.
