So you’ve been looking into bridging loans and wondering about income requirements?
It’s a common question – do you need a job or steady income to qualify for one? Let’s clear that up and take a closer look at how bridging loans really work.
Bridging Loans: The Basics
A bridging loan is a short term loan that helps you ‘bridge’ a financial gap.
Think of it as a temporary stepping stone to get you from A to B. These loans are often used for buying property at auction, renovating a house or breaking a property chain when moving home.
Bridging loans are different to your usual mortgage or personal loan.
They’re fast to arrange and flexible, lasting usually from a month to 3 years. The interest rates are higher than standard mortgages because they’re a short term solution not a long term commitment.
Bridging loans are secured against property, this means the lender looks more at the value of the property you’re using as security than your personal finances.
This property focused approach is what sets bridging loans apart from traditional lending.
explore bridging loansIncome in Bridging Loan Applications
When you apply for a standard mortgage or loan, lenders want to see proof of reliable employment and steady income. They’ll ask for payslips, bank statements and various documents to confirm you can afford the repayments.
With bridging finance it’s different.
Lenders care more about the property you’re using as security and your exit strategy – how you plan to pay back the loan at the end of the term. This could be through selling the property, refinancing to a standard mortgage or using funds from another source.
This doesn’t mean income is irrelevant.
Having a good provable income will always help your application but it’s not always the deciding factor. Bridging loan lenders look at the bigger picture – the property’s value, your project’s potential and how realistic your repayment plan is.
Can You Get a Bridging Loan Without a Job?
Yes, you can get a bridging loan without a job.
Bridging loans are secured against property and don’t require monthly payments, so having a job isn’t really necessary.
For example you might be a property developer between projects.
You may not have a regular income right now but if you have a good track record and a new project in the pipeline a bridging loan could help you get started.
Or maybe you’re retired with a valuable property but limited income.
A bridging loan for pensioners could help you access your home’s equity for a short term need without having to sell.
Or you might be waiting for an inheritance or legal settlement. A bridging loan could give you the funds you need in the meantime and the future windfall could be your exit strategy.
Let’s talk bridging loans!
Do I Need Proof of Income?
Not always but it can be helpful.
Instead of looking at your income, bridging loan lenders will ask for:
- A professional valuation of the property you’re using as security
- A detailed plan of how you intend to repay the loan (your exit strategy)
- An overview of your assets and liabilities
However, there are situations where proof of income may be required.
If you’re taking out a regulated bridging loan – one secured against a property you live in or plan to live in – lenders will need to see income proof as part of responsible lending practices. This may form part of their affordability checks.
Also if your exit strategy is to refinance to a standard mortgage, lenders will want to see evidence you’d qualify for that mortgage when the time comes. This is where a Decision in Principle (DIP) would be useful.
How Lenders Assess Bridging Loan Applications
If income isn’t the main focus, what are lenders looking at?
Property valuation
This is key. Lenders will want a professional valuation of the property you’re using as security. They’ll look at both the current market value and the potential ‘forced sale’ value – what the property would fetch if sold quickly.
Exit strategy
Your plan to repay the loan is important. Whether it’s selling the property, refinancing or using other incoming funds, lenders need to be confident your strategy is realistic and achievable.
Related: How Do You Pay Back a Short-Term Bridging Loan?
Asset-based assessment
If you have a strong asset portfolio, even if it’s not generating regular income, this can work in your favour. Lenders might consider your overall financial position rather than income.
Project viability
For property development or renovation projects lenders will assess the potential profitability. If you can show the project will increase the property’s value significantly this can support your application.
Experience and track record
If you’ve completed similar projects before this can give lenders confidence in your ability to manage the current project and repay the loan.
Additional security
Offering other properties or assets as additional security can help support your application. Some lenders may also consider personal guarantees but it’s important to understand the implications before agreeing to them.
Credit Checks
Most lenders will still want to carry out background credit checks. This helps them to see how indebted you are, and how you have managed your finances over the last six years.
They’re less concerned with your credit score and more interested in your overall financial behaviour.
If you think that this may pose a problem then consider a non-status bridging loan. There’s not that many around but these lenders don’t need any credit searches.
In terms of LTV, non-status lenders go up to 70% LTV, compared to 90% LTV for a standard bridge.
Need some help?
If you need a short-term bridging loan then a specialist broker is a good place to start. You will get expert help and advice along with a wide range of lenders to choose from.
To get matched with a specialist broker, please call us on 0330 030 5050.