How much do you need to put down for a bridging loan?

Bridging loans are a popular short-term finance solution in the UK, helping property investors, businesses, and individuals secure funding quickly. Whether you’re purchasing a property at auction, investing in commercial property transactions, or facing chain breaks, understanding the deposit requirements is crucial. This guide explores how much you need to put down for a bridging loan, covering key factors, costs, and alternative funding options.

Understanding Bridging Loan Deposits

A bridging loan typically requires a deposit ranging from 20% to 40% of the property’s value. The exact amount depends on various factors, including the type of loan,  credit history,  loan terms, secured loan, property type, and borrower profile. Bridging loan lenders assess risk based on factors such as credit score, exit strategies, and asset value.

The article is updated as of Feb 4 2025

Factors Affecting the Minimum Deposit for a Bridging Loan

1. Loan-to-Value Ratio (LTV)

Bridging lenders generally offer loans with an LTV of up to 75%, meaning borrowers need to contribute a cash depositfor the remaining 25%. In cases where additional security property is offered, the deposit requirement may be reduced.

2. Property Type

• Residential properties typically require a lower deposit.
• Commercial bridging loans may require a higher deposit due to greater risk.
• Unmortgageable properties or uninhabitable properties often need a larger deposit to mitigate lender risk.
• Development projects needing planning permission may require additional funds upfront.

3. Credit Score and Financial History

Borrowers with poor credit, bad credit, adverse credit, or previous bankruptcy may need a larger deposit or face higher loan interest rates due to increased risk.

4. Loan Exit Strategies

Lenders prefer borrowers with a clear exit plan, such as refinancing with a long-term mortgage or selling the property. Having a strong repayment plan can help secure favourable terms.

5. Loan Purpose

• Buy-to-let property loans may have different requirements than those for commercial purposes.
• Property refurbishment loans require clear planning for investment returns.
• Bridge loans for auction purchases often require higher deposits due to strict repayment terms.

Bridging Loan Costs Beyond the Deposit

Apart from the deposit, borrowers must consider other costs:

• Broker fees – Charged by a bridging loan broker for arranging finance.
• Arrangement fee – A lender facility fee, usually 1-2% of the loan amount.
• Valuation fees – Required to determine the market value property.
• Legal fees – Covering contract reviews and legal charge registrations.
• Exit fee – Some lenders charge this upon loan repayment.
• Monthly interest rates – Interest can be rolled-up interest or monthly repayments.
• Admin fee – Covers processing expenses.
• Repayment fees – Incurred when settling the loan early.

Please note that you have to contact a mortgage broker to know the exact fees.

Can You Get a 100% Bridging Loan?

Some lenders offer 100% bridging loans with no upfront deposit, but these typically require:

• Additional properties as security.
• A strong business plan for commercial purposes.
• A solid exit route with clear financial backing.

We would suggest you to contact a specialist mortgage broker to help you with such mortgage applications.

Eligibility Criteria for a Bridging Loan

• Loan applications are assessed on the borrower’s ability to repay.
• Bridging finance is available to individuals, companies, and offshore companies.
• Financial history, including credit checks, bank statementsA record of a borrower's financial transactions often requir..., and tax returns, will be reviewed.
• Minimum deposit requirements vary based on the loan provider.
• Additional checks may be required based on risk assessment.

Contact our team of specialist mortgage brokers to find the out the exact eligibility criteria.

Alternative Finance Options

For those unable to meet the deposit requirements, options include:

• Asset finance – Using valuable assets as collateral.
• Personal loans – To cover loan deposits.
• Commercial mortgage – A longer-term alternative to bridging finance.
• Second-charge bridging loan – Allowing borrowing against existing property equityThe difference between the value of the property and the amo....
• Pension funds – Some lenders allow access to funds for property investment.

Conclusion

The deposit required for a bridging loan in the UK depends on the loan amount, type of funding, property value, and borrower profile. Most lenders require 20-40% deposits, but alternative funding methods can reduce this. Working with a specialist bridging loan advisor, CeMAP-qualified mortgage adviser, or expert mortgage brokers ensures access to the lowest rates and suitable finance solutions.