Does a bridging loan affect future mortgage applications?

3 Jul 2024

Thinking about taking out a bridging loan but concerned about the impact on future mortgage applications? Worry not, here's everything you need to know.

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Can taking out a bridging loan affect future mortgage applications?

Yes, bridging loans can have both a negative and positive impact on the strength of your applications. Here’s how.

A bridging loan can impact your credit score

Credit scores are one of several tools lenders use to determine application approval. So, if you plan to utilise a mortgage anytime soon, carefully consider the impact a bridging loan could have on your credit score. Approximately 16% of homeowners have previously been refused a mortgage and with the number rising to 66% for first time buyers, you'll want to strengthen your application in as many ways as possible. 

What is a credit score?

A credit score is a number lenders use to assess the likelihood you will repay a loan. Your loan repayment history, the accounts you currently hold, and whether or not you’re registered to vote can all play a role in your credit score.

How can a bridging loan positively affect your credit score?

A bridging loan could increase your credit score if you make regular, timely repayments and repay the loan in full at the end of the term. By meeting your payment obligations, you demonstrate to lenders that you’re a responsible borrower who can handle debt.

Could a bridging loan have a negative impact on your credit score?

Yes, for several reasons.

First of all, if you don’t make timely repayments or don’t repay the debt in full a bridging loan will have the opposite effect on your credit score. Your score will go down, signalling to mortgage lenders that you may not be able to manage a loan of this size.

Not only that, but a bridging loan application and a mortgage application will both add hard searches to your credit report. Since bridging loans are usually short-term loans repaid in under 12 months, by the time you come around to applying for a mortgage it’s possible the hard search may not have been removed from your credit report, thus impacting your application. 

Lastly, if you’re unable to repay the loan in full, the property may be repossessed which would also have a negative impact on your ability to successfully apply for future property finance. 

Your affordability could be impacted

This depends a lot on whether you have repaid the bridging loan by the time you apply for a mortgage. As you may have experienced in the past, when applying for a mortgage lenders will usually evaluate any outstanding debts or bills. If you haven’t repaid the bridging loan yet, this could show up under your current accounts and impact how much lenders feel you can comfortably borrow.

Communication is key. Discuss your exit plan with your lender. For example, if you plan to use the mortgage to pay off the bridging loan you should let the mortgage company know so that they don’t think you’ll be paying off both at the same time.

Find a bridging loan or apply for a mortgage

We help match borrowers to our network of 120+ lenders offering between £1000 and £20M. Click the link below to find out if you’re eligible for a bridging loan or mortgage.  

Find a bridging loan or mortgage


Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.

Funding Options
Funding Options

Editorial team

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