Dealing with the death of a loved one can be challenging enough, and having to decipher complex tax terms and procedures can make it even more overwhelming. One such concept that may surface during this time is the inheritance tax (IHT) levied on the deceased’s property that is passed on to beneficiaries.

You may find yourself in a position where, despite being owed a significant sum by way of legally entitled inheritance, you lack the on-hand funds to meet your own inheritance tax requirements, which can feel like something of a dead end but can be resolved quite simply (and affordable) with a bespoke financial solution.

Understanding current IHT thresholds                                                     

The inheritance tax threshold, or “nil rate band”, is currently £325,000. If the value of the estate, including the value of any assets given away or sold at a reduced price within the last seven years before death, is below this threshold, there will be no IHT payable.

However, if the deceased’s estate worth exceeds the £325,000 threshold, the portion exceeding the threshold is taxed at a rate of 40%. These high tax rates often put pressure on beneficiaries, especially if the majority of the estate’s value is tied up in non-liquid assets, like property. This is why many find it difficult to pay IHT, leading them to seek alternative funding options.

What are inheritance tax loans?

This is where an inheritance tax loan comes in. It is essentially a loan taken out to pay the inheritance tax due on an estate. These loans are generally short-term and are repaid once the estate’s property is sold off or other funds become available.

The main point of appeal with this type of funding is that it ensures the prompt settlement of the IHT bill, avoiding any potential penalties for late payment. Moreover, it buys time for the inherited assets to be retained and/or sold at a later date for their full value, instead of selling them off in a rush (at a potentially lower price) to reconcile tax debts.

Of course, being able to access the estate you are legally entitled to early is also a huge benefit. The issue has traditionally been (albeit somewhat ironic) that the more you are owed, the more difficult it is to meet your own tax obligation to complete the probate process.

How IHT loans work

When you apply for an IHT loan, a lender essentially offers funds secured against the inherited assets. The assets you will be inheriting are used as collateral against the loan, which technically means that the lender has the right to repossess them if you do not repay your debt as agreed.

Once the loan is approved, which can be as fast as a few working days, you can use it to pay your IHT bill, and the debt is later repaid when the inherited asset (usually property) is sold or from other funds.

Applying for an IHT loan

While it is possible to apply for an IHT loan directly with a lender, doing so is not always the best option. In terms of both getting the best deals and lightening the load for yourself, it is always best to seek independent broker support.

A broker can help you navigate the complexities of IHT loans, putting their knowledge and contacts within the industry to good use and making the process as smooth and simple as possible. Your broker will guide you every step of the way, helping relieve at least some of the pressure of your financial responsibilities during an already difficult time.

For more information or to discuss the potential benefits of inheritance tax loans in more detail, contact a member of the team today.

As things stand, you would be hard-pressed to find anyone with genuine optimism for the immediate economic outlook. Inflation in the UK is already hovering close to 11%, but experts are increasingly predicting a peak of almost 19% in the early stages of next year. All of this is likely to make the current living-cost crisis seem insignificant when compared with the economic hardship to come.

Consumer confidence is as low as it gets, average wages are in no way keeping up with escalating living costs, and people are being forced to make all sorts of modifications to their spending patterns simply to make ends meet.

Sadly, experts like Nick Jones, sales director for bridging finance at lender West One Loans, only see things getting worse before they get better.

Flexible finance in troubled times

But while the overall picture is somewhat pessimistic, it may not all be doom and gloom. With the growing availability and affordability of bridging finance, more people and businesses than ever before will at least be able to tide themselves over if facing a temporary economic shortfall.

There will even be those who are able to capitalise on the economic downturn in order to make the best of a bad situation.

“There will be opportunities for customers who are looking to expand their portfolios and make investments, and we will be here to support them,” said Jones.

Elsewhere, bridging and development finance specialist at Brightstar, Stephen Watts, indicated that “bridging finance is being increasingly sought to enable buyers to put themselves ahead of their competition”.

With available housing inventory continuing to outstrip supply by a considerable margin, those able to do so are setting their sights on potentially profitable property investments. And in many cases, they use short-term bridging loans to expand their portfolios at relatively short notice.

Figures from the most recent Bridging Trends Report found that, in spite of the current economic chaos, bridging loan volumes for Q2 this year were up 14%. Throughout the first six months of 2022, the most popular application for bridging finance was picking up an investment property.

The speed and simplicity of home buyers and investors looking to take advantage of time-critical property purchase opportunities. Not to mention, jump the queue and escape the trappings of conventional property chains entirely.

Cash buyer benefits

But it is not just the UK’s more established property investors that are finding bridging finance a useful facility. Conventional homebuyers are finding it increasingly difficult to secure property purchases via conventional channels.

Today, the typical mortgage application takes approximately 12 weeks to underwrite, authorise, and issue. In the meantime, competing buyers have up to three months to submit a superior offer and beat you to the punch.

Coupled with the risk of the seller simply pulling out of the deal at any time, conventional home purchases are becoming increasingly difficult.

With bridging finance, homebuyers can gain access to the benefits of purchasing properties as cash buyers. They borrow against their current home, they fund the purchase of their next home in a matter of days, and they beat all competing bidders to the punch.

In doing so, they eliminate the risk of being gazumped at the last minute and benefit from the property price discounts afforded exclusively to cash buyers (often up to 2% of the total property price).

For as long as the economic situation in the UK remains unstable, the appeal of bridging finance will continue to grow. Particularly for those who are asset-rich but cash-poor, bridging finance can be the ultimate affordable stopgap solution for times of economic turbulence.

As if the UK’s economic picture wasn’t already sketchy enough, its future outlook is even gloomier. The cost-of-living crisis is likely to worsen before it improves, with the Bank of England warning that inflation could go beyond 10% before the year is out.

But there is at least one positive in all the doom and gloom, at least from a bridging finance perspective; while all this is going on, the bridging loans sector is not only booming but is also offering its most competitive products in history to a growing audience of borrowers.

Application volumes and inquiry levels continue to hover at unprecedented highs as businesses and consumers alike take their businesses away from the major High Street banks. The more difficult and expensive it becomes to qualify for conventional loans or mortgages, the greater the tendency to seek unconventional alternative options.

One of which is bridging finance, which, due to its speed, flexibility, and accessibility, has skyrocketed in popularity over the past couple of years.

“This is great news, of course, particularly in the challenging economic environment,” said Vic Jannels, chief executive at The Association of Short-Term Lenders (ASTL).

“The latest ASTL lending data for the final three months of last year has revealed that completions were £1.2m for the quarter, which represents a record high and an increase of 19% on the previous quarter. This has led to another increase in loan books, which now stand at £5.08bn,” added Jannels.

Housing market competition: A key driver

Gross bridging loan completions were up a full 32% (reaching £485 million) during the first six months of last year, increasing further to an impressive 52% by November. This momentum has been largely maintained throughout 2022, resulting in average bridging loan interest rates hitting a new all-time low.

All of which is playing right into the hands of prospective homebuyers, many of whom are becoming increasingly disenchanted with what is available on the High Street, if not entirely out of the running for mortgage loans, due to increasingly strict lending criteria.

Demand for affordable homes continues to outstrip supply in almost every part of the UK. For buyers looking to avoid regrettable chain-break scenarios, bridging finance is offering a fast-access lifeline. Secured against their current home, a bridging loan can be used to buy their next home outright and allow plenty of time to sell their previous home for its full market value.

In addition, property developers are turning to bridging finance to fund purchases and renovations of vacant properties across the country. As most major banks continue to classify homes in questionable condition as ‘not mortgageable’, developers are finding themselves with little choice but to explore the alternative options available.

Matthew Arena, managing director at Brilliant Solutions, believes that the bridging finance sector is playing a major role in easing at least some of the pressure the housing sector is under.

“Bridging is performing well and has helped with several key housing issues,” he said.

“With property supply being so scarce, the ability of investors to develop or refurbish property and sell quickly is driving the sector,”

“Equally, the regulated element of the business is growing as the drive to move is as high as ever and suitable property is so difficult to find.”

“This is leading to more refurbishment and also a higher tendency to pay for bridging as a chain-break solution because there is a greater certainty of sale and a higher perceived loss if the opportunity falls through.”

Competitive finance with flexible terms

Unsurprisingly, demand for fast-access bridging finance has triggered a major spike in product availability from a growing network of specialist lenders. Once a fairly niche field, the bridging sector has become fiercely competitive.

Covering the needs of consumers and businesses alike, there are so many lenders now fighting to get new customers on board that average interest rates have been plummeting. It is now the norm to be offered a bridging loan with a monthly interest rate in the region of 0.5% or less, having once been reserved exclusively for prestige clients.

Meanwhile, associated borrowing costs (arrangement fees, transaction fees, completion fees, etc.) have likewise been dropping for some time, if not being removed entirely by many bridging specialists.

Alongside increasingly competitive deals, the flexibility of bridging finance is also proving a big draw for prospective borrowers. Employment status, proof of income, financial position, credit score, none of the usual obstacles apply to bridging finance applications.

Bridging loans are issued primarily based on two things: the provision of assets of value to cover the costs of the loan and evidence of a viable exit strategy for timely repayment. No jumping through hoops and no need to disclose your entire life story, as remains the case on the High Street.

All of which paints a picture of a booming bridging finance sector that’s becoming increasingly attractive to borrowers from all backgrounds. And with more economic doom and gloom on the horizon, it is a trend that looks set to continue for some time to come.

Most major and minor renovations can make a positive contribution to the market value of any home; the extent to which home improvements influence property values varies significantly from one property to the next.

There are several significant home improvement projects that are known to contribute significantly to market values in the current climate. If you are looking to sell your home for the best possible price, irrespective of its location, these are the renovations worth considering right now:

Cellar conversions

Even a relatively rudimentary cellar conversion to create an additional room can boost the market value of a home by as much as 30%. If you have a relatively spacious cellar that could be converted into a comfortable shared living space, it could make a major contribution to the market value of your home.

Garage conversions

The same also applies to garage conversions, where the renovation results in a fully functional additional living space for the property. A converted garage can be used to set up a home office, a home cinema, a game room, or a guest bedroom. It can also be a surprisingly affordable project if the existing structure of the garage is relatively sound.

Loft conversions

A loft conversion can be carried out to create additional storage space, add an extra bedroom to the property, or create a quiet and secluded haven for relaxation. On average, it is estimated that a loft converted into a functional living space can boost the value of a home by around 15%.

Conservatory construction

The installation of a conservatory almost always boosts a home’s value far beyond the associated construction costs. Exact values vary from one installation to the next, but a typical conservatory will boost a home’s value by at least 10% on average.

Driveways

Even something as simple as a functional yet attractive driveway is known to significantly boost curb appeal for prospective buyers. Where a property does not have a private garage, a driveway is the next best thing.

Kitchen extensions

A kitchen renovation can be a great way of boosting the value of a property, but not nearly on the same level as a kitchen extension. As the kitchen is considered the heart of the home by most would-be buyers, it is often scrutinised more intensively than all other living spaces. Expanding a compact kitchen with a modest extension is guaranteed to boost the value of the property as a whole.

Bathroom updates

Last but not least, a bathroom makeover can also make a real difference. This also tends to be a space that is heavily scrutinised by prospective buyers, resulting in a renovation that almost always pays for itself with its subsequent contribution to the market value of your home.

Comparatively, few businesses get by without borrowing money. Ranging from the smallest start-ups to the largest multinational conglomerates, on-hand capital is rarely enough to leverage major growth and development opportunities.

Financial products and services for businesses are in short supply, though in all instances they have their unique pros and cons. Listed below are pointers as to why it is important to consider all available options before deciding which lending stream suits your business, your budget, and your objectives.

Borrowing from a mainstream lender

Most major high-street banks offer a variety of loans and other financial products for businesses. As a general rule of thumb, borrowing from a mainstream lender means submitting a convincing application with robust evidence of strong financial performance. How much you can borrow (and whether you will qualify in the first place) is established on the basis of your firm’s turnover, financial position, future projections, and so on. Your own experience and business acumen may also be taken into account, making mainstream lenders a less-than-ideal option for smaller and newer businesses.

Business bridging loans

Bridging finance can be ideal in instances where the funds are needed as quickly as possible. Depending on the size of the loan required and other key factors, a bridging loan can be arranged and accessed within 48 hours. In addition, bridging loan eligibility is assessed nearly exclusively on the basis of security, aka collateral. Specialist lenders are often willing to consider all types of properties and assets that would not be considered eligible by most mainstream lenders. Bridging finance is designed to be repaid within a matter of months, typically on the basis of a monthly interest charge of less than 0.5%.

Commercial property loans and mortgages

It may be possible to secure a mortgage or similar loan against a commercial property that is under your ownership. The amount you can borrow will be determined by the equity you have in your property, i.e., how much of the existing mortgage you have paid off. Commercial property loans can open the door to affordable monthly repayments, though they can be comparatively costly long-term and are typically available exclusively to those with a strong credit history.

Invoice factoring

This can be a surprisingly accessible, affordable, and flexible solution for small and large businesses alike. Invoice factoring essentially places a middleman between the business and its clients. When an invoice is issued by the business, the invoice factoring service immediately pays a proportion of its value, typically around 75%. When the client pays the balance of the invoice at a later date, the business collects the remaining 25% minus the costs of the service. Invoice factoring can be great for both avoiding and dealing with temporary or long-term cash flow issues.

Peer-to-peer borrowing

Lastly, P2P borrowing enables businesses to access competitive loans for all purposes directly from investors. P2P lending platforms eliminate the middleman from the equation, enabling those lending money to businesses to offer small and large sums of cash with much lower overall borrowing costs. P2P borrowing is also a viable option for applicants with a poor credit history, which may not be a key eligibility factor with some P2P lenders.

To learn more about the most competitive business borrowing options available or to discuss your requirements in more detail, contact a member of the team at Bridgingloans.co.uk for an obligation-free consultation.

You’ll find the concept of the second charge explained in relentless detail by countless financial specialists online. Nevertheless, finding a definition that’s not disastrously overcomplicated is something entirely different.

So for those who’ve been wondering what second-charge loans and mortgages are all about, you’ll find a concise overview and explanation detailed below:

What Is a Second Charge Loan?

A second-charge loan, aka second-charge mortgage, provides homeowners with the opportunity to raise capital by using their property as security. An alternative to a personal loan or remortgage, a second charge loan is simply a second mortgage taken out alongside a primary mortgage.

Remortgaging is different in that a remortgage deal enables the borrowers to pay off their prime remortgage in full, switch to a new mortgage deal (often with a new lender), and continue to pay one mortgage as before. The benefit typically is lower monthly repayments or lower overall borrowing costs. Remortgaging is also an option for raising extra cash to fund property development works, extensions, renovations, and so on.

While there are similarities between the two, second-charge mortgages are not the same as remortgage products. Primarily, a remortgage deal simply converts your current mortgage into a different type of mortgage, while taking out a second charge mortgage means having two separate mortgages secured on your home.

The two products also differ in terms of eligibility. When taking out an initial mortgage or remortgageing a property, eligibility is determined by the applicant’s credit rating, proof of income, financial status, and often the size of the deposit they can pull together. With a second-charge mortgage, applications are typically scrutinised exclusively based on the borrower’s equity. Or, in other words, the value tied up in their home.

It may still be necessary to provide evidence of your ability to repay the loan as agreed, but credit checks and extensive financial background checks are usually unnecessary.

It’s important to be aware of the fact that ‘equity’ in this instance refers to how much of the borrower’s property they own outright at the time of the application. In a working example, the applicant has a £300,000 mortgage on their current property and has so far repaid £125,000. This would mean they have £125,000 equity, which could be used to secure a second charge mortgage.

Again, by general eligibility.

What’s particularly useful about a second-charge mortgage is that loans are often available for as little as £1,000. Hence, there’s no requirement to borrow more than you need if you’re looking to tackle a relatively minor project.

Should I apply for a second-charge mortgage?

A second-charge mortgage is one example of the countless secured loans available for homeowners. Even if you are perfectly eligible for a second-charge mortgage, it may be useful to first consider the alternative options available.

For example, while it’s possible to borrow as little as £1,000 by way of a second-charge mortgage, an unsecured personal loan could be more affordable for any sum lower than £10,000. Likewise, if you plan to fund a short-term project and will have the means to repay the loan balance within a matter of months, you could save time and money with a bridging loan.

Particularly where poor credit applications are concerned, it’s worth comparing all available options both on and off the UK High Street. Compare the market in full under the supervision of an independent broker to see which secured (and unsecured) products best suit your needs.

It is fair to say that buying property since 2013 has become more of a sellers’ market. Open houses and block bookings for viewings are the chosen tactics for estate agents on Saturday mornings. If you have been in this scenario recently, you will recall the anguish of telephone tennis between offers being rejected and other interested parties increasing their bids, making the process of securing a property much more difficult. This makes the prospect of investing in property with this much competition slightly terrifying. Time is of the essence when offering an advantage against first-time buyers with no chain. The eager purchasers are at the mercy of their chosen lender to package, offer, and raise funds in a process that can vary between 8 and 12 weeks. Mortgage lenders in most cases are often large organisations, and with the amount of transactions going through, the process can sometimes take time, with the average decision from the underwriters taking 7 working days. Brokers up and down the country have been listening to their clients concerns and have pulled rank to diversify their offerings with a quiet revolution in property finance.

Bridging is a term that surrounds a lot of mystery to most buyers. It is difficult to ignore bridging loans because the number of customers taking up the products has more than doubled. You can put into Google ‘what is a bridging loan?’ but you will still be left none the wiser. This article hopes to debunk the jargon on bridging, adding another string to the bow when competing for property investments.

Firstly, it would be best to address what a bridging loan means. They are short-term loans for larger amounts of money needed quickly. You wouldn’t want a bridging loan for longer than 12 months because they have a higher annual rate of interest than the high street. If speed is what motivates you, then this type of finance can be packaged in as little as 24 hours.

Bridging loans can be used in a variety of scenarios, including:

• Buying a property without having sold your own.
• Helping in between pension payments in lump sums.
• Looking to refurbish a property to sell on for profit.

There are several types of bridging finance to consider because there are so many different uses. Selecting the right loan type can determine interest, loan value, and the security raised.

Understanding the difference between an open and closed bridging loan is essential when selecting the right bridging finance:

• A closed loan is when a deadline is given with an exact date to repay the loan and the lender knows how you intend to repay; this is known as an exit strategy. The lender will need evidence that you can repay the loan within the time limit. Typically, lower interest rates are available with closed bridging loans in contrast to open loans due to a lower-risk exit strategy.
• An open-bridging loan, on the other hand, is ideal if you don’t have a clear exit strategy. The loan, like a closed bridge, will still need to be paid back by the deadline but won’t have a clear proposition for repayment. Naturally, open bridging finance is deemed more risky, so to compensate the lender, the interest rates are higher than for a closed bridging loan.

The minimum you can borrow with bridging finance is £10,000 with no maximum limit, but some lenders set their own restraints on how much they are prepared to lend.

Interest rates are not just dependent on the type of loan taken but also the loan-to-value ratio. Loan-to-value (LTV) is the ratio of the amount of the loan to the value of the asset purchased. Most bridging loan specialists will have a calculator on their websites to work out the average cost of interest and fees. This will make shopping around slightly more informative for the savvy borrower. As a guideline, the monthly rates can start at 0.44% and reach 1.5%, but remember that this will ultimately change based on your circumstances and requirements.

Whether it’s a regular mortgage or specialist financing options that suit the current project, the ability to tailor borrowing has never been more versatile. If you’re interested in learning more about the choices readily accessible, please contact our consultants at UK Property Finance.

If you’re considering applying for a bridging loan, an understanding of key bridging loan regulations could prove helpful. Bridging loan regulation in the UK isn’t a particularly complex subject but should be factored into the decisions you make when choosing a lender.

The FCA took control of all aspects of bridging loan regulation in the UK as of April 2014. At which time, control of all CCA loans was transferred to the FCA. This resulted in various changes to the prior regime, affecting eligibility for certain borrowers.

What is a regulated bridging loan?

A bridging loan is formally classified as ‘regulated’ when the loan is issued against a property that is currently (or soon to be) occupied by the applicant or a close member of their family.

Both first-charge and second-charge regulated bridging loans are available, which means that the loan can either be the sole loan secured against the property (first charge) or secured ‘behind’ an existing loan on the property, such as a mortgage (second charge).

Regulation of bridging loans: two classifications

There are two primary classifications of FCA-regulated bridging loans available in the UK, which apply to loans provided for different purposes.

The first classification encompasses bridging loans regulated by the Financial Conduct Authority by reference to its MCOB Rules, known as a ‘regulated mortgage contract’. This classification applies to loans secured by way of a first charge over the applicant’s home or the home of a close family member or spouse.

The second classification of FCA-regulated bridging finance applies to loans that are secured by a second charge over the applicant’s home or the home of an immediate family member. This type of loan is regulated by the FCA by reference to its CONC Rules and is known as a ‘consumer credit loan’.

The bridging loans regulated by the FCA must be secured against property owned by the applicant, which they either currently occupy or intend to occupy in the near future. The primary condition of these regulated bridging loans is that the owner (or a close member of their family) occupies at least 40% of the property and is their primary residence.

Hence, the property must be used primarily as a place of residence rather than as a commercial property or business venture.

Accessing the best deals on the market

Here at UK Property Finance, we work exclusively with top-rated lenders from across the UK. We provide access to exclusive deals and discounts on fully regulated bridging loans for all purposes. By carrying out a whole-of-market comparison, we’ll ensure you’re provided with an unbeatable deal to suit your requirements and your budget.

If you have any questions regarding bridging loan regulation in the UK, we’d be delighted to hear from you. Contact a member of the team at UK Property Finance today for an obligation-free consultation.