Bridging With Bad Credit: the exit decides it

Yes, you can.

Will you get the best rates on the market? No, you won’t. So let’s deal with that bit honestly first, because it explains everything else.

Why the cheapest lenders don’t want complicated cases

The lenders with the sharpest rates are working on a very small profit margin. Half a percent, say.

On a margin that thin, their risk has to be low. So they want clients where the deal will be quick and easy with no complications. The more complications there are, the more people who have to get involved, and the more that margin drops.

That’s it. It isn’t personal and it isn’t a judgement on you. It’s arithmetic.

So no, you won’t get the cheapest money on the market. But you can get bridging finance. Expect to pay more than the headline rates you see advertised, and expect the fees to reflect the work involved.

Not all adverse is the same

There are lenders who’ll consider different types of adverse for different types of bridging, and they don’t treat it all as one lump.

Have you got CCJs? Is it missed mortgage payments? Are they defaults? Was it a life blip, one bad period with a clear reason behind it?

All of those land differently, and a lender will take the shape of it into account rather than just looking at a number.

But it always comes back to the exit

I’ve said this until I’m blue in the face and I’ll keep saying it. It’s all about the exit strategy.

Here’s the trap people fall into, and it catches out plenty who thought they were sorted.

You go to a bridging lender and say you need a bridge, you’ve got adverse credit, will you lend. And they say yes, that’s fine, here’s the money.

Then comes the actual question. How are you giving it back?

If your answer is “I’ll refinance onto a residential or buy to let mortgage”, the next question writes itself. Which residential or buy to let lender is going to accept that adverse?

The bit that makes these deals work

There are residential and buy to let lenders out there who’ll accept adverse. So that’s a plausible exit. But a bridging lender isn’t going to take your word for it, and nor should they.

So don’t just claim the exit. Evidence it.

Here’s how we do it:

• Get a decision in principle with the exit lender, with an actual credit search behind it.
• Speak to the underwriter first, before anything is submitted, so you know what they’ll take a view on.
• Get it in writing. An email from the underwriter explaining that this is something they can consider.
• Send all of that to the bridging lender alongside the application.

Then the conversation changes completely. You’re no longer saying “trust me, I’ll refinance.” You’re saying: yes, he’s got adverse credit, we’re not hiding from that, and here’s a decision in principle with a credit search already done, and here’s the underwriter confirming they can look at it.

There’s one thing saying a lender would consider an application. It’s another thing entirely when you actually run the credit search. That gap is where deals die, and closing it before you start is most of the job.

A real situation: the end of the term, not the end of the product

This one comes up more than you’d think, and it’s worth understanding even if your credit is spotless.

A client reached the end of their mortgage term with a high street residential lender. Not the end of the product, the end of the term. The whole thing was due.

It was an interest only mortgage with around £300,000 outstanding, against a property worth about £700,000. So roughly £400,000 of equity sitting in it.

Their plan had always been to sell the property and repay the interest only balance out of the proceeds. Which is a perfectly reasonable plan. Nothing wrong with it at all.

Except it didn’t sell as quickly as they wanted.

And because it hadn’t sold, the balance hadn’t been repaid. And because the balance hadn’t been repaid, the bank started talking about repossession.

Nobody wants that. Full stop.

The complication

On top of the time pressure, the client had adverse. Over the years there had been missed payments, missed mortgage payments and missed utility bills.

Their thinking had always been: I’ll sell, I’ll have £400,000, I’ll buy somewhere outright, and I’ll never need finance again. So the credit file didn’t feel like it mattered.

Life didn’t go that way, and suddenly they needed finance.

What actually needed solving

We looked at whether a residential mortgage was possible, and it probably was, even if the rate would have been eye-watering.

But that was answering the wrong question. The problem wasn’t whether they could get a mortgage. The problem was that they had weeks, not months, before the bank moved.

So I asked what the actual goal was. To sell it. Right, then this is a short-term problem and it needs short-term finance.

Is it on the market? Yes. Have you got interest? Yes, three viewings this weekend. Good. But even with a buyer this weekend, a sale still takes a couple of months to go through, and that’s the time you haven’t got.

How it was put to the lender

We went to the bridging lenders and put it straight. No hiding.

Here’s the client. He’s got adverse, and we’re not going to pretend otherwise. He isn’t the best with his money.

But look at the rest of it. There’s £400,000 of equity. The property is genuinely on the market, and here’s the link to the listing. He’s selling it. He then wants to use that equity to buy another property in the area outright, and here’s Rightmove showing you what’s available at that price.

He doesn’t need a mortgage to repay us. He doesn’t need a mortgage to buy the next place. So the adverse credit, while real, doesn’t touch the exit at all.

That’s the whole argument, and it’s the one worth learning. Adverse credit matters most when your exit depends on borrowing again. When it doesn’t, it matters a great deal less.

What the lender said

Not ideal about the adverse. They’d want to understand how it came about rather than just seeing it on a file.

And because this is a regulated case, secured on the home the client lives in, they were careful. They didn’t want to move someone out of one difficult position and into another one. That’s the right instinct and it’s what regulation is for.

They’d also want a physical valuation. Someone actually going to the property to check it’s proper security and the roof isn’t falling in.

So, can you get a bridge with adverse credit?

Yes.

But the questions that decide it aren’t the ones people expect. It isn’t really about the score.

What’s the scenario? What’s the end goal? And what’s the exit strategy?

If you can answer those three, and evidence the third one, adverse credit is a pricing conversation rather than a closed door.

If you’re struggling at the moment and you need a bit of help, give us a call on 0330 133 4442. We can talk through a bridging option, and we can talk through the other options too. Sometimes bridging is the answer and sometimes it isn’t, and you should hear both.

If you’re worried about missing mortgage payments or about repossession, speak to your lender early, and free independent help is available from MoneyHelper and from Citizens Advice.

Figures relate to the circumstances and the lending terms available at the time of that transaction, and the terms available to somebody else may be different. Bridging finance is short-term secured borrowing and it can be expensive. If a secured loan is not repaid in line with its terms, the lender may take enforcement action against the property or any other security provided. This is general information, not personalised advice.