A bridging loan is a short-term finance facility that are mainly used for the purchasing of a property or properties.
However, can they be used for first-time buyers using it for a home deposit? We are going to look at if a first-time buyer can use a bridging loan for a home deposit and if so, how they can use it to help them out.
Yes bridging loans can be utilised by a first time buyer, as long as there is an asset available to put up as security against the loan and there is a viable exit strategy. such as a long term mortgage The lender may also take into consideration other factors such as the income and credit score.
First Time Buyers and Bridging Loans
Bridging loans can be used for a variety of reasons, with property development, house deposits and purchasing a property, being a few of the uses.
Residential bridging loans are aimed at those who need a short-term, financial solution to help them within the property market whether it’s the purchase of a property, or using the money to put down a deposit on a house.
Each lender will be different in what they offer, so you may find that some don’t always provide residential bridging loans, for first-time buyers.
However, bridging loans for a home deposit is an excellent idea if you need a quick, financial solution to help secure a property. The deposit is put on a house and secures it, but it isn’t anything to do with the mortgage of the property. It’s a way to be able to secure the place you want, by putting down a deposit on it.
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How Can A First Time Buyer Get A Bridging Loan?
Bridging loans for home deposit are available for up to 70-80%, depending on if you plan to live in the property or not, but all lenders are different.
With first time buyers, most of the time they will be buying the property for them to live in, rather than rent it out.
For first time buyers, residential bridging loans will be limited by your exit strategy and the likeliness of being able to pay the loan back, to meet the repayment terms.
If you have a good exit plan and a way to pay the loan back within the short amount of time, then you should be sufficient to get one, providing you find the right lender.
It’s just like any regular application for a residential bridging loan, and the lender will look into your financial history, security and exit plan.
If they are confident and trust that you do have a plan to pay the money back, then they will progress with the bridging loan for a home deposit.
What Will A First Time Buyer Need To Get A Birding Loan?
Just like any bridging loan, first-time buyers will need to complete an application with the lender you choose.
During the application and consultation process, for bridging loans for home deposits, they will require ID, proof of residence, details of the exit strategy and how you will be able to pay the loan back.
It may be more of a thorough process than if you were to get a standard residential bridging loan, but bridging loans for home deposits can be harder to get and therefore, a more thorough process is needed.
As well as this, regular consultation and valuation will be carried out, and they may look more into the exit strategy and security that can be used.
Once all of this is complete, you will then find out if you have been approved for the bridging loan or not. Then from this, if you have been approved, you can then use the money, to help with the deposit on a house.
To answer the question, yes, bridging loans can be used for a home deposit for a first-time buyer. However, it may be a lot harder for them to get one and find a lender that will offer them one.
They are easy to get if you already have an existing property and are wanting to secure the deposit on a house you would like to move into, as the sale of the former home can be used to pay the loan back.
However, for first-time buyers, they do not have this chain and therefore, may struggle to get money to pay the loan back in a short amount of time.
However, there are possibilities such as savings, assets, income and inheritance that they may have access to, that can be used within the year, to pay the loan back.
Sometimes, you might not have quick access to these funds and therefore, would need a bridging loan to get the money quickly, and secure a deposit on a house.
When it comes to getting a bridging loan for home deposits, especially for first time buyers, lenders might carry out a more thorough process and valuation, so they can ensure that you can pay the loan back within the repayment terms.
It is essential to look at different lenders and see what they can offer, as some may not like to work with first-time buyers, whereas some may be more open to.
As long as you have a good exit strategy in place along with a plan that will result in you paying the loan back, then it should be relatively easy to get one.
As said above, some things can be used as your plan to pay the loan back, such as getting inheritance money.
Some people might be given a lump sum of money when they reach a certain age etc. and therefore, they could use this money to the pay loan back.
Property Finance Partners offers bridging loans for a variety of different reasons, we have the experience of putting together your application speedily and advising on all matters of property finance.
For more information contact Property Finance Partners on 020 3393 9277 or email us [email protected]. There is no obligation and we look forward in helping and advising on any aspects of property finance.