High Value & Large Sum Bridging Loans – A Guide
By Helen Jackson -
Whether residential or commercial, buying property in the UK can be very expensive. In just two short years, the average house price has increased from £231,940 in January 2020 to £273,762 in January 2022. That’s an increase of 18% — so it’s not surprising that landlords and property investors are turning to large sum bridging loans for a bit of financial help.
This guide explores your options when taking out a large sum bridging loan. Find out the differences between these and average-sized bridging loans, the pros and how to avoid any associated risks.
Can you use bridging finance for large or high value loans?
Yes. Many bridging companies will be willing to provide bridging loans to borrowers looking to invest in high-value projects. Whether they lend to you is based on the project, your personal experience and circumstances, and your ability to pay back the loan with interest.
Whether you need a bridging loan to buy your new house before the sale of your old home goes through, a relatively low-cost purchase. Or you are interested in purchasing a large commercial property that needs major renovation, costing millions of pounds. Most bridging loan providers will consider each project case-by-case, judging the project on several factors before justifying the amount they lend.
What’s the highest amount specialist bridging lenders are willing to let me borrow?
The amount you’ll be able to borrow when taking a bridging loan out will depend on several factors: the overall value of your property portfolio, personal finances, and experience as a property developer.
Most lenders will only provide a 75% loan-to-value (LTV) ratio, so you’ll need to bear in mind that a larger bridging loan will require you to provide 25% of the money required. Of course, with larger loans, your 25% will require a more considerable amount.
Bridging loan providers in the UK tend to offer anywhere from £25k up to £25m, with some lenders offering way beyond this amount. So often, the sky’s the limit for the right project.
Is how much I can borrow affected by my current wealth or assets?
Proof of income is not usually required when securing a bridging loan. Instead, the lender will usually look at your overall wealth and what assets you have to use as collateral — they’re only interested in how you’ll pay back the money.
Suppose you are a high net worth individual (HNWI), usually defined in the UK as someone with a personal wealth of £10 million or higher. In that case, you’ll be in a much better place to request a larger bridging loan, as the lender will see you as less of a financial risk. However, the amount they will lend will still depend on the project, even if you are worth more than £10 million.
An alternative to evidencing your personal wealth is showing what assets you have to provide as collateral in exchange for a large bridging loan. Many lenders will only look at assets in the form of property, but some will consider assets such as cars, machinery, land, etc.
What sorts of people are more likely to qualify for a large sum bridging loan?
You might find it slightly easier to obtain high-value bridging finance as an HNWI. But as long as you can provide evidence of your ability to pay back the loan and meet the basic criteria (aged 18+ etc.), you will likely be accepted for a bridging loan.
However, speaking of age, in some instances, certain bridging finance lenders may have upper age limits on who they will lend to, just like an older borrower may struggle to get a mortgage on a property they wish to purchase.
What projects or loan uses are bridging finance lenders most likely to lend large sums to?
Bridging loans can be used for commercial and residential property purchases, renovation and development projects, and cash for auction purchases.
Let’s say you’re looking to purchase a commercial property that needs renovating — for this project, you’ll most likely need a large sum bridging loan. This is because the eventual return on investment (ROI) will be sizeable and therefore worth the initial outlay.
Are interest rates affected by taking out a larger bridging loan?
Interest rates on a bridging loan are generally high — they’re not known as a cheap financial product. And you can expect to pay more interest on a bigger loan, as it’s a larger amount you need to pay off.
The interest rate offered will depend on your situation. For example, you can access more favourable interest rates if you’re willing to put down a larger initial deposit.
What are the benefits of high value bridging loans?
There are many benefits of high value bridging loans, and we’ve summarised a few of them below:
- Make larger purchases or purchase properties that need a great deal of renovation.
- Receive all the money in one go, allowing you to move on a property quickly with the financial support of one lender.
- Super quick turnaround – instantly, you can make an offer on a property you wish to buy and have a bridging loan set up in as little as 72 hours.
What are the risks (and how can I avoid them)?
Like any financial decision, taking out a bridging loan can be risky; however, the larger the amount, the riskier the decision becomes. Here are a few things you should be thinking about:
- Bridging loans have much higher interest rates anyway, but you may pay greater fees and interest rates due to the larger loan size. So make sure you have priced everything up and only borrow exactly what you need to complete your purchase.
- You may find it difficult to get a large-scale bridging loan in the first place. The best way to overcome this issue is to put together a robust exit strategy to convince the lender that you can easily repay the loan.
- You will be putting your possessions, in the form of assets, at risk when you take out a bridging loan. Obviously, the larger the loan, the greater the collateral needed. So be very sure what you are willing to part with should you fail to repay the loan.
Are you currently eyeing up a high value property in need of some renovation? If you need finance, visit our bridging loan directory and compare lenders at your own pace.