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No proof of income is required for a bridging loan, bridging loans are totally non status so you will not be asked for proof of your income, a bridging loan is not like other types of loan in that the lender secures the loan against the property which they fall back on if the loan is not repaid when it falls due, the only time they would ask for proof was if you elected to pay the interest monthly as it falls due this to make sure you have the income to meet the required payments, however nearly all bridging loans are with what is called rolled up interest what this means is that they take a portion of the loan and put it aside to cover the interest for the whole of the loan period, if you repay the loan back early then you are refunded the amount that has not been used, it works as follows you want a loan for 12 months at an interest rate of 5% so for the 12 months of the loan you will be paying £5,000 so you will get an advance of £95,000 with the interest put to one side so you have no monthly Repayments, pay the loan back in say 6 months and you will get a credit of £2,500 to cover the interest that you did not need so you only pay back £97,500.
Should you elect to pay the interest payments monthly then you would have to show the lender that you have the means to cover the monthly payment, if it is from your income than they would need to see proof of this income, it does not necessarily have to be from earned income it can really be from any source as long as it is reliable and will definitely be available to you.
Bridging loans do come with other charges that you will need to take into account things such as fees and solicitors costs, these are as follows.
These are fees that a lender puts onto the loan for dealing with all of the arrangement costs and are fairly consistent across all lenders at 2% of the amount of the loan, you will not have to pay these in advance rather they are deducted from the loan only when you draw down so in the instance of a £100,000 loan you will receive £98,000 as an advance, think of this fee the same way than many mortgages have arrangement fees.
Lenders will want to instruct a Surveyor to carry out a valuation to make sure that the property that is offered is suitable for the loan to be secured against and also that the value that is placed on it is realistic, note this value that they use is what is called a 90 day valuation what this means is that if they had to sell the property to get their money back then it would really sell within 90 days, you should be aware that this is often lower than what an estate agent would put on the property where vendors are quite happy to sit on the property to achieve a higher price.
This is another cost that will need to be accounted for and you will also have to meet the lenders costs on their legal fees at a predetermined amount you should factor into your costs for a minimum of £500 for this and it could be more it really all boils down to the amount of work they expect the solicitor to undertake on your loan, and finally the costs of your own solicitors which you would agree with them
So to recap no proof of income is required if you have your interest payments rolled up and taken off the loan, you will need to show either income or a source of funds if you want to Repay Interest on a monthly basis.
UK Bridging Loans are one of the UK’S leading bridging loan brokers and can search all of the loans on the market to source the perfect deal for your circumstances.
Contact us now to discuss your proposal and we can assure you of the very best advice and service, call us now 0800 138 6001 or use the contact form on this page to compare loans.
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