What factors influence bridging loans interest rates?

  • A clear exit strategy – a better rate of interest is achieved if you can give the bridging lender certainty of repayment. Repaying a bridging loan is usually from the sale of property or remortgage. Other repayment methods of repayment include inheritance, sale of stock and shares, business income and even high value items such as artwork, prestige cars, antiques.
  • Low loan to value – The best bridging loan rates are achieved with a higher deposit and LTV below 50%.
  • Type of charge – the lender with a first legal charge has first claim to the security and therefore less risk of losing on their investment.
  • Experienced borrower – you are more likely to secure more competitive bridging loan terms if you have experience and a track record of success. Many lenders are happy to provide a bridging loan to first-time buyers or inexperienced borrowers. To compensate for the higher risk, they may charge a higher rate of interest or ask for a larger deposit to lower the interest rate.
  • Clean credit history – the interest rate can be higher for a borrower with a history of defaulting on their loans.
  • Type of property – lower interest can be achieved with bridging loans secured on residential property. It is lower risk to a lender than a commercial property because there is generally higher demand and quicker to re-let and sell.
  • Quality of asset – lower interest rates are offered to high quality, well located property in high demand areas.

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