How To Get A Bridging Loan In Scotland?

Bridging Loan In Scotland

Bridging finance emerges as an excellent solution when it comes to acquiring property in Scotland or enhancing an existing property site. Commercial endeavours often demand a sense of urgency, making bridging finance an immensely popular choice. This guide offers valuable insights into obtaining bridging finance in Scotland and answers the questions you may have about the process.


What Is a Bridging Loan?

A bridging loan can be a lifeline for those looking to secure fast and flexible financing, especially property developers, landlords, or homebuyers. Essentially, it “bridges” the financial gap between selling your current property and purchasing a new one. For property developers and landlords, opting for a traditional mortgage or property loan from a conventional lender can be time-consuming. Standard mortgages may take months to complete, and the application process can be protracted, leading to potential rejections. Bridging loans offer a hassle-free and expeditious alternative to access funds.


Typically, bridging loans come with a solid exit strategy. Repayment of bridging loans in Scotland offers various flexible options, ensuring that borrowers can choose the most suitable method for their circumstances. The repayment strategies are designed to align with the specific needs and goals of borrowers, providing versatile choices for addressing the financial commitment. Here are the primary methods for repaying a bridging loan:


  1. Remortgaging: Remortgaging the property is a typical method of repaying a bridging loan. After the bridging loan has paid off, homeowners may want to consider taking up a long-term mortgage on the property. This mortgage can provide a more extended repayment term, reducing monthly financial burdens. It’s important to ensure that the exit strategy involves obtaining a remortgage with favourable terms.
  2. Selling the Property for a Profit: For property investors or those who aim to buy, renovate, and sell, selling the property for a profit is a viable repayment method. When the property’s value has increased, the proceeds from the sale can be used to clear the bridging loan and realize the profit margin. This strategy is particularly appealing for investors looking to maximize returns on their property ventures.
  3. Switching to a Self-Build Mortgage: In cases where the bridging loan was used for self-build or renovation projects, switching to a self-build mortgage is a suitable exit plan. Self-build mortgages are designed for those constructing or extensively renovating their own properties. Once the project is complete, the borrower can secure a self-build mortgage to settle the bridging loan. This transition ensures that the borrower has appropriate, long-term financing in place.


How Do Bridging Loans Work in Scotland?

A bridging loan serves as short-term mortgage finance, with a typical maximum term of 12 months for residential properties and potentially longer for investment properties. These loans “bridge” the financial gap until long-term financing, such as a mortgage, is secured or the property is sold. Bridging loans offer access to substantial amounts of finance, akin to a mortgage, but with terms structured for the short term.


Interest is calculated on a monthly basis, reflecting the expectation of repayment within a year. After the initial minimum loan period, daily interest charges apply. For example, For instance, you will only be charged interest for the first 14 days of a bridging loan repayment, not the entire two months, if it is paid back in one month and 14 days. Every bridging loan needs an exit strategy that is well-defined and mutually agreed upon, including your repayment strategy for the loan over the allotted time. The exit strategy may involve refinancing with a mortgage, proceeds from the sale of another property owned by the borrower, or selling the secured property.


Obtaining bridging loans in Scotland can be somewhat challenging, primarily due to variations in property laws compared to the rest of the UK. This can be especially true when approaching traditional high street lenders. Those looking for a bridging loan in Scotland may find fewer lenders operating in the country, and those who do may have specific location constraints. If you’re operating in Scotland, applying for an unregulated bridging loan (for commercial purposes) could be your best option. However, we strongly recommend seeking expert advice to ensure a smooth application process and optimal results.


Bridging Loans for Homebuyers in Scotland

Bridging loans offer a range of benefits for property buyers in Scotland:

  • Swift Property Purchase: If you want to buy a new property but are awaiting the sale of your current property, a bridging loan can provide you with the funds needed to secure your new home.
  • Self-Build Projects: Self-build conservation and renovation projects can be challenging to fund. A bridging loan that allows you to ‘roll up’ the interest can be an attractive alternative, avoiding monthly interest payments that can be redirected toward your project.
  • Property Auctions: Property auctions often require a 10% deposit to secure a property. A bridging loan can help you acquire the property while you secure the remaining funds.


Other Uses of Bridging Finance

Bridging loans can be used for various purposes, including:

  1. Business Financing: Bridging loans can cover short-term start-up or business costs and taxes when raising the required sum isn’t feasible.
  2. Development Financing: If you plan to buy a derelict property for renovation and resale, a bridging loan can be an ideal solution.
  3. Land Purchase: Bridging loans can be used to acquire land, whether for personal or commercial use, that is not intended for property development.


Lenders Offering Bridging Loans in Scotland

Several trusted bridging loan lenders operate in Scotland, including:

  • Alternative Bridging Corporation: Providing residential and commercial loans on a first or second-charge basis.
  • Ortus Secured Finance: Offers loans ranging from £100k for standard bridging loans to £25m for commercial loans.
  • Hope Capital: Provides finance for residential and commercial property purchases, refurbishments, or land acquisitions.
  • TFG Capital: Offers no-nonsense bridging finance with lending decisions based solely on the security value.
  • Fiducial: Specialised in projects in Scotland, they promise low-interest rates on loans ranging from £250k to £25m.
  • Roma Finance: Offers bridging finance from £75k to £3m across England, Wales, and Scotland.
  • Assetz Capital: Accepts applications from various business structures, providing loans ranging from £150k to £5m.
  • Shawbrook Bank: Offers terms of up to 24 months on a 75% Loan to Value, lending from £50k to £15m.


How Much Can You Borrow With a Bridging Loan in Scotland?

Determining the borrowing capacity of a bridging loan in Scotland is a fundamental aspect of property financing. To assist you in this process, our bridging loan calculator can offer you a quick estimate based on your specific requirements.


It’s vital to recognise the limitations and challenges associated with securing mortgages from traditional lenders. High street banks and building societies are frequently the first choice for borrowers looking for unsecured loans or mortgages, but they might not always be the best alternative, especially if time is of the essence or if the property is difficult to mortgage.


Conventional lenders usually conduct a thorough evaluation procedure to determine your mortgage eligibility. This can be a lengthy process that requires multiple weeks to complete. Furthermore, conventional lenders could be hesitant to support specific types of properties financially. For example, high street lenders are generally unwilling to grant mortgages for properties that they classify as “unmortgageable.” Such properties include those with a value under £50,000, structural issues, lack of a bathroom or kitchen, or are classified as derelict.


However, adventurous Scottish investors experienced in extensive building works, aiming to renovate for rental or resale, often find these “unmortgageable” properties offer excellent profit margins. In such cases, alternative property financing is essential.


Securing Bridging Finance in Scotland

Finding the right lender is crucial when seeking a bridging loan in Scotland. We recommend reaching out to multiple lenders to secure the best possible deal for your specific needs. It’s essential to weigh your options and consult with experts in the field to ensure a seamless and successful application process. Contact us to set up a time that works for you to talk about your bridging finance purchase options.