If you are concerned about your credit status then you might want to consider a non-status bridging loan.
This type of short term funding focuses on your property’s value not your personal circumstances. It’s becoming increasingly popular, especially with investors and developers who need quick access to funds.
But what is a non-status bridging loan and is it for you? Let’s find out.
What is a Non-Status Bridging Loan
A non-status bridging loan is a short term loan secured against property.
Unlike standard bridging loans, it doesn’t rely on your credit score or income for approval. Instead lenders are more interested in the value of the property you’re using as security.
Here’s a simple way to think about it:
If you’re buying a house, a traditional mortgage lender will want to know all about you – your job, your income, your credit history. With a non-status bridging loan the lender is more interested in the house itself.
They’re asking, “If we had to sell this property, could we get our money back?”
These loans are available from £150,000 to £25 million with terms from 3 to 36 months.
Interest rates are slightly higher than a standard bridge loan but this reflects the higher risk nature of these loans.
How They Compare to Standard Bridging Loans
The main difference between non-status and standard bridging loans is the assessment criteria.
Standard bridging loans are faster than mortgages but still involve credit checks and income verification.
Non-status loans put much less emphasis on these.
For a standard bridging loan you may need to provide proof of income, bank statements, credit history and exit strategy. With a non-status loan the focus is more on property valuation, exit strategy and strength of security.
Because non-status loans don’t require income or credit checks, they can be arranged faster.
In terms of LTV, non-status lenders go up to 70% LTV, compared to 90% LTV for a standard bridge.
Who is a Non-Status Bridging Loan for?
Non-status bridging loans can be a lifeline for many types of borrowers but are most suited to those with bad credit.
They’re ideal for:
- Property developers who need quick funds to secure a project
- Investors with complex income structures that don’t fit traditional lending criteria
- People with imperfect credit scores
- Borrowers who have assets but don’t have a job
- Those who need to complete property purchases quickly, such as at auction
Let’s look at an example.
Sarah, a property developer, found a great opportunity to buy a property at auction. She knew she could renovate it and sell it for a profit but she didn’t have time to go through a traditional mortgage application.
A non-status auction bridging loan allowed her to secure the property quickly, without having to worry about her credit history. This allowed her to renovate and sell it on.
Common Uses for Non-Status Bridging Loans
Auction purchases are common but non-status bridging loans have many applications:
- Breaking property chains: If you’re waiting for your house to sell but have found your dream home, a bridging loan can help you secure it.
- Renovation projects: They can provide funds for major works before refinancing or selling.
- Business cash flow: Some businesses use them to manage short term cash flow issues.
- Probate cases: They can be useful when you’re waiting for an inheritance to come through but need funds immediately.
All bridging loans are designed to be fast. Having your credit history checked can be a little unnerving, and you often don’t know what the lender could uncover.
A non-status lender would not be looking into your credit history, so it just removes that possibility.
How to Apply for a Non-Status Bridging Loan
So how do you get a non-status bridging loan?
The process is faster and involves less paperwork than traditional loans but there are still steps to follow.
First, you will need to source a suitable lender, and the best way to do this is via a specialist bridging loan broker. Most bridging lenders prefer to work with brokers, and almost all of the non-status lenders are broker-only.
Required Documentation and Criteria
You won’t need to provide as much personal financial information but you’ll still need to submit:
- Property details – the property you’re using as security
- Exit strategy – how you plan to repay the loan
- Proof of ownership of the security property
- ID and address verification
You’ll also need to comply with anti-money laundering regulations. This means providing proof of the source of your deposit or down payment.
Remember the property is key here. The lender will want to know its current value and if you’re planning renovations its potential future value. They may ask for things like recent property valuations, plans for any proposed works and planning permissions (if applicable).
Let’s talk bridging loans!
Advantages and Disadvantages
Like any financial product non-status bridging loans have their own pros and cons.
Let’s take a balanced look at both.
Benefits of a Non-Status Bridging Loan
The benefits are:
- Speed: You can get funds in days, perfect for time sensitive deals.
- Flexibility: Lenders can be more accommodating with non-standard properties or situations.
- Asset value: Your property’s value matters more than your personal finances.
- No credit checks: Ideal if you have a bad credit history.
These can be a big deal in the UK property market.
For example in areas like London or Manchester being able to move quick on a property deal can be the difference between getting a good deal and missing out.
The Risks and Considerations
But you need to be aware of the downsides:
- Higher interest rates: You’ll pay more interest than standard loans.
- Short repayment terms: You need a clear plan to repay the loan.
- Repossession: If you can’t repay you could lose the property you’re using as security.
Things to Consider Before Applying
Exit strategy: This is really important. How will you repay the loan?
Common exit strategies are selling the property, refinancing to a traditional mortgage or using incoming funds from another source.
Costs: What are all the costs involved, interest, arrangement fee, valuation fee, legal costs?
Timelines: Can you complete your project and repay the loan within the term?
Alternatives: Have you considered other options? In some cases a standard bridging loan or even a mortgage might be better.
Professional advice: Given the complexity and risks involved it’s best to speak to a specialist mortgage broker who knows the UK bridging loan market.
Non-status bridging loans are a niche product in the property finance market.
They give quick access to funds based on property value making them ideal for investors, developers and others who struggle with traditional lending criteria. But they come with higher costs and risks that need to be considered.
Get in touch if you would like to talk about non-status bridging loans. We know the UK bridging loan market inside out and can help you decide if this is for you.
