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How Much Can I Borrow with a Bridging Loan?

Writer's picture: Ricky GandhiRicky Gandhi

table of Contents

  • Introduction

  • How much can I borrow with a bridging loan?

  • Factors that affect the amount you can borrow

  • How to calculate the maximum amount you can borrow

  • Conclusion

Introduction

A bridging loan is a short-term loan that is used to bridge the gap between two sources of finance. They are typically used by property investors and developers, but can also be used by businesses and individuals.

Bridging loans are secured against property, which means that the lender can take possession of the property if the borrower defaults on the loan. This makes bridging loans a riskier investment for lenders, which is why they tend to have higher interest rates than other types of loans.

The amount of money that you can borrow with a bridging loan will depend on a number of factors, including:

  • The value of the property that is being used as security

  • The borrower's credit score

  • The borrower's income and assets

  • The lender's risk appetite

How much can I borrow with a bridging loan?

The maximum amount you can borrow with a bridging loan will typically be 75% of the value of the property that is being used as security. However, some lenders may offer higher LTVs, depending on the borrower's circumstances.

For example, a borrower with a good credit score and a high income may be able to borrow up to 85% of the value of their property. However, a borrower with a poor credit score and low income may only be able to borrow up to 65% of the value of their property.

It is important to note that the maximum amount you can borrow with a bridging loan will also be affected by the lender's risk appetite. Some lenders are more willing to lend to borrowers with higher risk profiles, while others are more conservative.

How Much Can I Borrow with a Bridging Loan?



Factors that affect the amount you can borrow

In addition to the factors mentioned above, the following factors can also affect the amount you can borrow with a bridging loan:

  • The purpose of the loan

  • The term of the loan

  • The borrower's employment status

  • The borrower's financial history

  • The borrower's personal circumstances

How to calculate the maximum amount you can borrow

To calculate the maximum amount you can borrow with a bridging loan, you can use the following formula:

Maximum borrowing = LTV * Property value


For example, if the value of your property is £100,000 and you have a 75% LTV, the maximum amount you can borrow is £75,000.

However, it is important to remember that this is just a general formula and the actual amount you can borrow will depend on the factors mentioned above.

How Much Can I Borrow with a Bridging Loan?

Conclusion

The amount you can borrow with a bridging loan will depend on a number of factors. It is important to speak to a lender to get an accurate indication of how much you can borrow.






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