Bridging loans in Scotland

Bridging loans in Scotland are short-term loans secured on Scottish property and repaid by a sale or refinance, as in the rest of the UK. The difference is the legal framework. The lender takes a standard security registered with the Registers of Scotland, and the legal work is carried out by solicitors qualified in Scots law.

Not every UK bridging lender lends in Scotland, because of the separate legal system. Those that do usually instruct Scottish solicitors and surveyors on each case. The lending decision still rests on the property value, the loan-to-value and the exit route, in the same way as for bridging finance in England and Wales.

A standard security is the Scottish form of a mortgage over land or buildings. It is created under the Conveyancing and Feudal Reform (Scotland) Act 1970 and only takes effect once it is registered in the Land Register of Scotland. A bridging lender's security therefore depends on that registration being completed after drawdown.

Where there is already a mortgage, a bridging loan can take a second-ranking standard security, and the existing lender may need to agree a ranking agreement. That step can add time, so it is raised early. Scottish registration is handled under the Land Registration etc. (Scotland) Act 2012.

In Scotland, a purchase becomes binding when missives are concluded, which is often earlier in the process than exchange of contracts in England. Buyers who have concluded missives on a new home but not yet sold their current one can use a bridging loan to complete on the agreed date without waiting for their own sale.

Many Scottish homes are marketed at offers over a stated price with a closing date, which can make timing uncertain. A bridge gives a buyer the ability to proceed once an offer is accepted. How residential chain-break bridging works generally is explained on the page about bridging loans for house purchase.

Land and Buildings Transaction Tax, collected by Revenue Scotland, applies to property purchases in Scotland instead of Stamp Duty Land Tax. It is payable on the purchase whether or not a bridging loan is used. An Additional Dwelling Supplement can apply if a second home is bought before the first one has been sold.

LBTT was introduced by the Land and Buildings Transaction Tax (Scotland) Act 2013, and the Additional Dwelling Supplement can be reclaimed in some cases once the previous main residence is sold within the allowed time. Bridging costs come on top: interest, arrangement and exit fees, valuation and legal fees.

The same UK-wide rules apply. A bridging loan secured on a Scottish home lived in by the borrower or a close family member is normally a regulated mortgage contract under FCA rules. Loans on investment, commercial or development property in Scotland are usually unregulated, with criteria set by each lender case by case.

Lenders that cover Scottish property, and brokers who arrange bridging finance there, can be compared on the bridging loan brokers page. It is worth checking that a lender is set up to take a standard security before an application goes in.