If you are wondering if it is possible to get a bridging loan in Ireland, the short answer is yes. Anyone over 18 can apply for a bridging loan to finance a property purchase, whether residential or commercial, in Ireland. Since Central Bank Ireland began to raise the Euribor rate in 2021, bridging loan lending has increased by almost 50% as more home movers and property investors look for short-term financial solutions to enable them to purchase properties in today’s market.
Bridging loans allow buyers to bridge the gap between either selling an existing property and buying a new one or as a short-term financing solution when purchasing property at auction, where traditional finance options may take longer than the payment deadline allows.
In this article, we will cover the requirements of getting a bridging loan, how difficult it is to get approved and how quickly you can obtain a bridging loan if approved.
What is a bridging loan?
Before we consider the application process, let’s first define what a bridging loan is to ensure it’s the right type of finance for you and your circumstances.
Bridging loans are a short-term financing solution that typically runs between 12-36 months. They are ideal for property investors and residential buyers who cannot obtain a traditional mortgage or other finance quickly. They allow buyers more time to sort out their long-term financing solution for a property purchase. A bridging loan bridges the financial gap until a long-term solution is in place to finance the property or until it is sold.
Bridging loans must always be secured against high-value assets such as property. Bridging loans can be issued depending on your individual circumstances, starting at 500,000k euros with no upper limit. The maximum loan value is typically 75% of the LTV, including interest and fees, but this is considered case-by-case. One of the key benefits of using a bridging loan is that it can be secured and issued quickly if speed is important.
Here are a few examples of where a bridging loan can be used:
- When buying property at auction and full payment is required promptly.
- If a property chain collapses and you don’t want to lose out on the property you were buying.
- If you intend to renovate a property that is un-mortgageable and take out a mortgage when it is habitable.
Bridging loans are a good option for property buyers with a long-term financing plan but who need short-term finance to secure a property purchase. If you want to know more about bridging loans, check out our 2022 guide to bridging loans in Ireland here.
How difficult is it to get a bridging loan?
There are a number of misconceptions about how tricky it is to get a bridging loan. When you apply for a bridging loan, you’ll need to advise the lender what the loan will be used for. Bridging loans are a secured form of finance, and the loan will usually be secured against the property you are purchasing but can also be one you already own (as long as it is not your main residence). When applying, you’ll need to demonstrate a robust exit strategy which means having a plan for how the loan will be repaid at the end of the bridging loan term.
Some of the most common exit strategies for bridging loans include the proceeds from another property sale and money owed to you from other sources, such as an investment or refinancing via a traditional long-term mortgage. If your exit strategy is to renovate and sell the property for a profit, then the bridging loan provider must be satisfied that the market value and asking price are enough to cover the bridging loan cost.
As with other types of financial products, the borrower will need to undergo a credit check to obtain a bridging loan. Novellus does not put as much weighing on credit referencing and income ratios as high street lenders. It’s possible to obtain a bridging loan, whatever your background, even with less-than-perfect credit.
If you demonstrate a clear exit strategy for paying back the bridging loan at the end of the loan period, your credit rating won’t be the most critical factor when considering your application.
How quickly can I get a bridging loan?
One of the features of a bridging loan that makes it popular is the speed at which it can be issued. In urgent cases, it is possible to put through an application from start to finish within 48 hours. However, periods of one to two weeks are the most common.
The time it takes from application to funding release will vary depending on the complexity of the application and the properties being secured. For example, if a client is looking to finance multiple properties in development, it will take longer to value each property before a decision can be made.
Novellus doesn’t use any third-party credit committees to consult which is why their approval times are market-leading regarding response and speed. Traditional mortgage finance typically takes 30-60 days to approve which is time some buyers simply don’t have and where a bridging loan can be an excellent short-term option whilst a mortgage is being arranged.
What are the requirements for getting a bridging loan?
To secure a bridging loan, you will need to meet the following criteria and provide the following information before your application can be considered:
- Security for the loan. Borrowers will need to put up a physical asset as security to apply for a bridging loan. This is most commonly the property being purchased.
- A clear exit strategy. This is a solid plan for how to repay the loan at the end of the bridging loan period. This could be done through selling this or another property, refinancing, a property development project or cash redemption.
- Loan size and term. Most bridging loans run for between 12 and 36 months. Bridging lenders like Novellus will have a minimum loan value. For them, that’s €500,000k with no upper limit.
- Property type (whether residential or commercial) and details of the property condition and structure.
- Your credit history and income. Although your approval doesn’t solely depend on these, the bridging loan provider will need to run a credit check and see proof of income. However, these are not deciding factors for bridging loan providers and a good exit strategy carries more weight.
- Your age. Anyone over 18 can apply for a bridging loan.
- The reason why you need a bridging loan, for example, buying at auction, property chain collapse etc.
Once you have provided all the above information, the bridging loan provider can begin processing your application.
Bridging loans are available to a wide variety of customers in Ireland looking for an alternative property finance solution. If you are looking for a bridging loan in Ireland, they are most certainly still available. If you have any questions about bridging loans, and the overall application process, you can contact the team at Novellus here.