Do You Need a Salary To Get a Bridging Loan in the UK?
No, you do not necessarily need a salary to be eligible for a bridging loan in the UK and a lot of bridging lenders are willing to consider customers that do not have a regular income or job.
Instead, the eligibility of your application is based on the actual property itself that you are looking to purchase, its condition, its potential value, your track record, your plans and exit strategy.
Bridging lenders understand that the income from a bridging loan comes from the resale or exit of the property, or if you plan to refinance and rent it out to tenants.
So a lot of lenders will be able to process your application if you do not have a regular salary, however, for regulated activity, the lender is likely to prefer applicants that have a steady income and can pass affordability checks.
How is The Criteria For Bridging Loans and Mortgages Different?
The criteria for a bridging finance is based mainly on the property you are looking to purchase and your exit plan – whether you are looking to renovate and improve its value and resell it or rent it out to tenants.
The skill is being able to find exciting property opportunities and increase their value. Hence, lenders base their underwriting on your property, its condition, its potential value, your business plan and clear exit.
To manage the risk, a bridging loan is secured and if it is not repaid, the lender has the right to claim a stake or repossess this property to recover their losses.
By comparison, a mortgage application follows more strict income checks, credit checks and affordability checks which is in line with the FCA’s guidelines.
With a mortgage, applicants must show they can reliably afford long-term repayments in order to qualify for living in the property.
What Will a Bridging Lender Consider if I Do Not Have a Salary?
Exit Strategy
Your exit strategy will be the most important factor that a bridging lender will consider. Whether you plan to sell the property, rent it out or secure long-term finance, the success of your application will depend on your ability to demonstrate this clearly through business plans, cost-analysis, forecasts and more.
Experience
If you are an experienced developer or have worked in the property industry, this insight will help you during your project and lenders will be more receptive if you do not have a regular salary.
Any Other Income
Although you may not have a salary, you may be able to demonstrate trust through other means such as receiving rental income, investments, pensions or business earnings in recent years.
Equity in Other Properties
Although you may not have a regular income, you may have equity in several other properties, which offers confidence to the lender that you have access to cash if you need it – or can afford to repay a loan under different circumstances.
Credit Score
A good credit score may not be required by all lenders and your application may not even be subject to a credit check. But lenders will be very cautious with any borrowers with a recent IVA, CCJ or bankruptcy.
Is Having a Salary Important For Regulated and Unregulated Bridging Loans?
Yes, for any regulated activity, this will fall under the FCA’s supervision and therefore, the lender will need to confirm the income and salary of any borrower, subject to approval. Again, you may not need to have a regular salary and other means discussed may apply such as rental income, recent business earnings.
For unregulated bridging loans, it may not be as necessary to have a regular salary, since lenders that do unregulated activity are more personal with the terms that they offer and are willing to take a view for customers from different backgrounds. Having a strong business plan and exit strategy will still be necessary.
Can I Still Get a Bridging Loan With No Income?
Yes, it is possible to be approved for a bridging loan with no regular income. But the lender does need some security and confidence that you can meet your repayments and avoid falling into arrears.
If you do not have a salary, you can show:
- Other assets (property) or investments
- Any wealth, even if tied up
- Previous business earnings from similar deals
- Strong credit history
- A clear exit strategy
Is It Possible To Get a Bridging Loan If You Are Self-Employed or Unemployed?
Yes, bridging loan customers are often solo-entrepreneurs, independent agents or self-employed people, especially as most borrowers are property developers and investors.
Being unemployed is not an issue, provided that you can demonstrate clear well-thought out plans and an exit strategy.
Does a Bridging Lender Run Credit Checks Before Approval?
Yes, regulated bridging lenders will often carry out credit checks to determine the eligibility of a customer – and equally be cautious with those that have faced recent defaults, arrears or bankruptcy.
With unregulated lenders, there is no obligation by the regulator to carry out credit checks – and this will vary between some lenders that do and some that do not.
