Some of our most frequently asked Borrower questions.
How much does it cost?
The valuation fee is the only cost up front. This is paid direct to the surveyor. Please note, in some cases, a maximum of £350 may be required to lock in the investor’s funds. This is refunded if we do not complete the bridging loan based on the information that was provided.
As a rule of thumb a valuation costs £110 per £100,000 of the value of the property.
Costs added to the loan
All other fees such as arrangement fees or legal costs are deducted from your loan (or added depending on your preference) when you receive your money. These fees typically include:
- An arrangement fee of 2%.
- Interest from 0.5% per month to 1.5% per month.
Do you charge an early redemption or exit fee?
It depends on the deal and the safety of the planned exit route. If there is an exit or early redemption charge, the typical amount would be one month’s interest payment. The minimum is zero.
How can I pay interest?
You can opt to service the interest monthly or you can pay the interest back at the end of the loan.
The interest rate is a fixed figure displayed monthly. The interest does not compound. The interest does not fluctuate and it is not variable.
How long will it take?
Bridging finance is quick. The speed really depends on the speed of your solicitors. The time scale it takes to complete is often between 5-18 days. This depends on a few factors beyond our control such as 2nd charge consent if applicable and the availability of local surveyors and your solicitors. Should you require, we can place you with one of our panelled solicitors to speed up the process.
What if my case is urgent? Do you offer a fast track service?
If your case is urgent and you need a quick completion, please advise your broker or case handler as to the deadline date and the reason why, we will then be able to offer a fast track service.
Who instructs the valuation?
It is highly recommended for speed and safety that the valuer is instructed by SoMo. A borrower will get a better deal this way as the valuer provides an indemnity insurance to the investors.
However if a report has already been compiled then we may accept it provided that we are happy with the surveyor and it can be re-typed and the indemnity is attached.
What valuation figure do you work off?
On most deals we look at the Open Market Value of a property as valued by a registered RICS surveyor from our panel. The 90-day value is taken into consideration, but this is not what is used in our LTV calculations.
If an asset is being purchased below the Market Value, we may lend up to 100% of the purchase price.
What security will you lend against?
We will lend against all types of UK property including:
- Residential property
- Residential developments
- Commercial property
- Commercial developments
- Mixed use property schemes
- Land, farms and agricultural
- Investment property – residential and commercial
What’s the maximum loan to value?
There is no hard and fast rule as each deal is assessed on its merits. However, as a guide:
The max Gross loan to value on a 1st charge is circa 70% (and 80% on special circumstances).
The max Gross loan to value on a 2nd charge is circa 68% (and 70% on special circumstances).
We can even offer 100% of the value where additional security or equitable (comfort) charges are offered.
Do you lend to people with adverse credit?
Often people seek a bridging loan as they have gone over term on their financial commitments and as a result have adverse credit. A bridging loan can be a good tool to help alleviate the financial pressure and allow clients the time and flexibility to return to a stable footing again and improve their credit.
What if I have no income or cannot evidence the income?
This is acceptable as you do not have to service the interest or loan monthly - you can pay it all back at the end of the loan. The important point with a bridging loan is your ability to repay the loan at the end of the period.
Acceptable repayment methods are:
- Sale of the security or another property
- Funds due from a business
- Funds due from a divorce
- Refinance onto a high street mortgage, a BTL mortgage or a commercial mortgage
- Sale of other assets
What can I use the money for?
You can use the loan for any purpose. The most common bridging loans are for:
Tight transaction deadlines
Often banks and high street lenders can-not facilitate a short term loan quickly enough whereby it takes several weeks, often months to underwrite.
Banks will not lend
More and more banks have an inability to lend on non-standard mortgage deals. As such, a bridging loan offers a quick, realistic process with decisions made by real investors.
Business cash flow
This takes many forms and is very common. Whether it is to fund a short term cash flow requirements or to purchase a new business or even to start a new one up then a bridging loan is often the quickest and most realistic prospect of raising the funds. With this loan the applicant will need to demonstrate that they can repay the loan either i) through the business or ii) through sale of the security or iii) another realistic repayment model.
Paying tax liabilities quickly or divorce settlements
We provide bridging loans to pay tax bills or to help in a divorce settlement.
Renovation or refurbishment of a residential, commercial or buy to let property
We are finding more and more that banks will not lend on properties that are in need of refurbishment or redevelopment. In this instance a bridging loan is the perfect tool to help finish the property.
Auction purchase – pre-approval required and fast completion
Often clients require pre-approval for a property that they wish to bid on at auction and need to complete within 14 days after successfully purchasing the property. In this instance, a bridging loan is the perfect tool to help facilitate the purchase. Often the exit strategy is to pay the money back via a traditional mortgage.
Chain break finance
A classic bridging loan need – where a client has an offer on their property but wishes to purchase another (or put a deposit down) and funds are required quickly for a short period and repaid when the property transaction completes.
Converting a property from a dwelling into flats or vice versa.
Landlords who are equity rich but cash poor / portfolio equity release
Many people, including landlords, have a lot of equity but cash may be tight. We will lend so that equity can be released from the properties in order to purchase new ones or pay off arrears and help the finances back on track.
Require a loan where interest is not serviced monthly
Interest on bridging loans can be serviced, rolled-up or retained. This means you can use the equity in a property to guarantee interest payments and these are paid on redemption.
Acquisition finance for business tenants to purchase their business premises from their landlord
Bridging loans for high net worth individuals
Large bridging loans for high net worth individuals for any purpose - subject to a realistic exit strategy.
Bridging loans for adverse credit applicants
Many people require a bridge because the banks and high street lenders have shut the doors firmly on anyone with adverse credit. A bridging loan is there to help get finances back on track, and in doing so, improve the credit scores.
Revolving credit facility (only on exceptional cases of low LTVs and high loan amounts)
We can offer a bridging loan secured against a main asset whereby the charge is registered and remains in duration and this allows you to draw down in stages as and when required.
100% purchase price with additional security
SoMo will advance 100% of the purchase price where there is additional security or comfort charges.
Many developers require a fund to reach the next level of a development before additional finance or a sale can be arranged.
How long can I borrow the money for?
From 1 month to 2 years.
What if I struggle to pay the loan back at the end the term?
We are social lenders and we will work with you. Provided that you are trying to repay the loan and this can be evidenced and is realistic then we will often allow a further period of time for you to repay the loan. On 95% of requests from borrowers we will allow a further time to repay. This is of course subject to a satisfactory sign off from our underwriting department.
If you repeatedly fail to repay the loan and, after an extension, you still show no signs of reasonably being able to repay the loan then your security could be at risk of repossession. However, this measure will only be used as a last resort and we will work with you to find a suitable payment plan.
Do you offer Regulated Bridging Loans?
SoMo is a trading name of Social Money Limited, a company which is authorised and regulated by the Financial Conduct Authority (Firm Reference Number: 675283) for credit broking, debt adjusting, debt administration, debt-collecting and debt-counselling activities and consumer buy to let loans. Social Money Ltd makes regulated and unregulated loans. However, SoMo makes unregulated bridging loans and as a lender, the loans that you make are not regulated by the FCA. Your loans are not covered by the Financial Services Compensation Scheme and you may or may not be able to refer any complaints to the financial ombudsman.
What if the valuation is lower than anticipated?
Where the valuation is lower than expected, we will still offer the loan but we may reduce the amount accordingly within our guideline LTVs.
Do I need my own solicitors?
Yes. If you do not have your own solicitors we can recommend one from our panel of solicitors who are expert at bridging and make the process quick and simple for you.
Can you recommend a solicitor?
Yes. We would recommend using one of our panel solicitors who are used to completing bridging loans so that the process is completed quickly. If you have a good relationship with your solicitor and wish to use them, then that is equally fine. The firm must have at least three partners and each individual applicant will need to seek separate legal advice from a different solicitor (it can be the different partners within the same firm).
What is an exit strategy?
An exit strategy is your plan on how you wish to repay the loan. Each loan will require at least one exit strategy.
Exit strategies vary. The most common repayment methods are:
- Via the sale of the security or another property
- Via remortgaging of a property or refinance of a development
- Out of business proceeds
- Tax rebate / sale of shares / pension matures
- Awaiting a property to sell
What is the risk?
Any land or property offered as security may be at risk and may be repossessed if you fail to maintain your financial commitments.