If you need short term funding for a property purchase but do not have a deposit available, you might be considering a 100% bridging loan.
These loans can potentially allow you to borrow the full purchase price of a property without putting down a cash deposit.
While they can be an attractive option for the right investor with additional assets, they are not straightforward and come with strict requirements.
What is a 100% Bridging Loan?
A 100% bridging loan, sometimes referred to as 100% LTV bridging finance, is a type of short term secured loan that covers the entire value of a property purchase.
Unlike standard bridging loans, which usually fund around 70 to 80 per cent of the purchase price, a 100% facility eliminates the need for a deposit, as long as you meet their criteria.
Lenders are cautious about offering this type of loan because it leaves them exposed to more risk.
For this reason, you will usually need to offer additional security, such as another property (for instance, if you are moving home, a charge across both the new one and existing one) or valuable assets, or be buying a property at a significant discount below its market value which can be proven by a RICS surveyor.
Can You Get Bridging Finance With No Deposit?
it can be possible to get 100% bridging finance, but it is less common. You will need to meet strict criteria and provide strong evidence that the loan is secure. There are two main ways this can be achieved:
- By offering additional security, such as another property you own, to reduce the lender’s risk. This strategy can be useful when an applicant has soured a new home but not yet sold their old one. If there is significant equity in the current property, a charge can be put on this home and the new one, for it to be redeemed when the current property sells.
- By purchasing a property below its market value, where the lender bases the loan on the valuation rather than the discounted purchase price. Not all lenders will offer this, and will use the lower of the value or purchase price, but some lenders may be willing to use the real value.
Even if you can meet these conditions, lenders will still expect a clear and credible exit strategy.
That means showing how you plan to repay the loan, either through refinancing, selling the property, or another reliable source of funds.
Find out Your Options
How Do 100% Bridging Loans Work?
Bridging loans are designed to provide short term funding, usually lasting between 3 and 24 months. The loan is secured against property or other assets, and interest can be paid monthly or rolled up to be paid when the loan ends.
With a 100% loan, the entire purchase price is funded, but the lender needs extra reassurance. This could mean:
- Using multiple properties as security, with each one needing a valuation.
- Providing other assets such as land or investments.
- Demonstrating you have a clear plan to pay them back within the agreed timescale.
Because of the higher risk to the lender, interest rates and fees may be more expensive compared to standard bridging loans against the one security property.
Risks of 100% Bridging Loans
While a 100% bridging loan can solve immediate funding requirements, it is important to understand the risks before committing:
- Higher costs: Interest rates and fees may be greater than lower loan-to-value bridging loans.
- Additional security: Other assets may be at risk if you cannot repay with the charge across multiple securities.
- Strict deadlines: Loans are short term and must be repaid on time.
- Limited availability: Not all lenders consider 100% facilities, especially when using just the one security being bought below market value.
If you fail to meet the repayment terms, lenders may repossess the secured assets. This is why careful planning and expert advice are essential.
When Might You Use 100% Bridging Finance?
There are several situations where 100% bridging loans may be useful:
- Buying a property at auction when you need funds quickly.
- Securing a property below market value, such as from a family member or distressed seller.
- Funding a renovation project where you expect to refinance once works are complete.
- Moving home when you have not yet sold your current property.
In each case, lenders will want to see that your exit plan is realistic and achievable.
How Much Will a 100% Bridging Loan Cost?
Costs vary depending on the lender, the property, and the level of risk involved. You can expect:
- Monthly interest rates from around 0.7 to 1.5 per cent, sometimes higher
- Arrangement fees, usually between 1 and 2 per cent of the loan amount
- Valuation and legal fees for each asset used as security
- Possible exit fees if specified in the agreement
Because the loan covers the full purchase amount, these fees can add up quickly.
However, interest payments can often be rolled up, giving you more flexibility in managing cash flow during the term.
Every case is different so speak with a professional broker who can work out the rates and costs that would apply to your situation.
Conclusion
A 100% bridging loan can be a useful way to secure property without needing a deposit, but it comes with other factors that need to be considered.
You will likely need additional security, a clear exit strategy, and a lender willing to take on the higher risk of 100% funding. Costs may also be higher than lower LTV bridging loans.
If you are considering a bridging loan, contact Kerr & Watson today for expert advice and personalised support.
