How Long Does It Take To Arrange A Bridging Loan?

A bridging loan is an excellent form of short-term financing for property purchase and development that typically lasts less than 12 months. But because it is not as well known an option as a mortgage, property developers understandably have a lot of questions. One of the most common questions we get asked is: “how long does it take to arrange a bridging loan?”

So today we’re going to answer that question.

How Long Does A Bridging Loan Take?

One of the reasons that bridging loans make a much better alternative to mortgages when used for property development is that they can be arranged incredibly quickly. If you contact a lender on a normal working day, it is not unusual to receive a decision within one or two hours.

For that to be achieved you’ll need to know how much you want to borrow, when you will pay it back and have an idea of how you will pay it back, too. You’ll also need to be able to provide information about you, along with any official documents if required.

While you can get a decision in hours, it may take longer to have access to the actual loan.

That’s because authorised and regulated bridging lenders will need to carry out eligibility checks like any mainstream lender. Your documents will need to be checked and the property you wish to purchase could need to be valued.

The lender will also need to verify and value the way in which you secure your loan. For most people using a bridging loan, this will be another property. The term of the loan will be based on this property and the amount that you can borrow will typically be based on a suitable valuation report of the property. This is usually around 70% of the property’s value.

While it would be nice if the bridging finance lender could trust your valuation of the property, this isn’t a reality. Usually, a lender will want to value the property themselves, although sometimes they may accept a recent survey if one has been completed. You may think that this will take a long time, but bridging lenders will have access to solicitors who understand the importance of time. As long as you can allow access to the property, it will only take a day for the property to get valued.

There will also need to be a small amount of legal work carried out. You can have your own solicitor do this, although it may take longer. Many lenders and borrowers prefer to trust a specialist bridging loan solicitor.

So how long does this all add up to?

It is possible to obtain a bridging loan quickly and have access to the funds in a matter of days. This is unusually fast, however. While the loan could be agreed in a matter of hours, it can take a week or longer to get access to the cash.

You have the ability to make the loan as fast as possible, however. If you have all of your documentation ready before you apply, you can make sure everything goes through as quickly as possible.

If they are so quick, when should bridging loans be used?

Because people can receive financing incredibly quickly with a business loan, there are a number of situations when a bridging loan should be used.

Bridging finance is most commonly used by property developers because they are also much quicker and more flexible than other types of development finance. That gives developers and investors the ability to compete with cash buyers and secure a great deal when time is of the essence.

But, increasingly, bridging loans are also being used by traditional buyers because of the length of time it is taking high street lenders to process applications. When a house needs to be completed quickly, mainstream lenders aren’t always a plausible solution. A bridging loan is, however, even if it means paying a higher interest rate for a short period of time.

Lenders who use this approach should be careful, however, as bridging loans are only meant to be used as a short-term financing option. That means it is important to have an exit plan in mind and look at early repayment where possible. This could be selling the home or land, in the case of a developer, or securing a long-term mainstream mortgage in the case of a typical home buyer.

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