Olivia Latham

Olivia Latham

Olivia Latham creates articles and press releases for property finance, auction finance, repossession, secured loans and all other finance available at UK Property Finance.

Closed and Open Bridging Loans – What’s the Difference?

It’s usually not until you make the decision to apply for a bridging loan that you discover just how many different types of bridging loans there are. Commercial loans, residential loans, second-charge bridging loans, and so on. Not to mention the often misunderstood concept of “open” and “closed” bridging loans.

Nevertheless, it is important to understand the key differences between the two if you are looking to take out a bridging loan for absolutely any purpose.

Closed bridge

In the simplest of terms, a closed bridging loan indicates a transaction where the borrower establishes a planned and defined exit strategy before the loan has even been taken out. Or, to put it another way, the borrower knows exactly when and how the funds will become available to repay the balance of the loan, in accordance with the requirements established during the application. In most instances, bridging lenders insist on knowing exactly when and how the balance of the loan will be repaid; hence, most bridging loans are considered closed bridges.

Open bridge

By contrast, some lenders are happy to offer somewhat more accommodating loans in the form of open-bridging loans. In this instance, the borrower is not able to provide a concrete repayment roadmap, usually because the funds are in very short supply. As such, they may have had insufficient time to think carefully about the specifics of the repayment aspect.

In terms of when open bridging loans are provided, it could be that the borrower already has some kind of strong working relationship with the lender or that their track record, in general, is one of flawless reliability. It could also be that the borrower has every intention of paying back the bridging loan when the property being financed is subsequently sold. They cannot provide an exact date or comprehensive overview of their repayment plans, but they nonetheless have a viable exit strategy. If the lender is confident that the borrower can repay the loan successfully, they may be willing to offer an open bridging loan.

Alternative bridging options

If bridging loans in general don’t represent an appealing or viable option, there are alternatives available. Examples include short-term asset finance, standard overdraft facilities, and so on.

In the case of short-term asset finance, it’s essentially a case of arranging secured loans by providing the required collateral. From jewellery to luxury cars to paintings to property to business assets and so on, just as long as you have assets to the required loan value, it is relatively easy to gain access to the funding you require. The application process can be comparatively simple, and interest rates and borrowing costs are typically flexible, depending on the lender you go to.

As for overdrafts and the use of general personal credit facilities, it isn’t generally recommended to fund major projects or purchases this way. The reason is that, as they’re not specifically designed for these kinds of purposes, they have a tendency to be both restrictive and expensive.

If you’re looking to explore the various options available to you, it’s advisable to speak to an independent broker with a wide-reaching network of mainstream and independent lenders.

For more information on any aspect of conventional or alternative financial products, get in touch with the BridgingLoans.co.uk customer support team today.

Estate Agents Struggle to Adopt New Anti-Money Laundering Legislation

Earlier this year, the introduction of new anti-money laundering legislation made it a legal requirement for estate agents to keep an eye out for the use of ‘dirty money’ by clients looking to purchase properties. However, the legislation was rushed in to such an extent that many estate agents are still entirely unsure as to what they should be doing and how they should be doing it.

The Fourth EU Anti-Money Laundering Directive came into effect on June 26 with relatively little fanfare. The idea being that the EU wanted estate agents to play a more active role in the detection and prevention of money laundering activities taking place across the UK property industry. But for reasons that haven’t been (and perhaps never will be) explained, the usual 21-day window prior to the legislation being implemented didn’t happen. Instead, estate agents were given just 24 hours to get on-board with the legislation.
Which was, suffice to say, nowhere near long enough.

As it’s an EU-wide measure, it’s been a case of individual governments ironing out their own policies to ensure compliance. And as the UK remains a member of the EU for the time being at least, it’s now a fully enforced UK law too.

The problem being that many estate agents have, quite understandably, interpreted the whole thing as a huge burden and additional responsibility they may struggle to cope with. In reality, economists and experts have stated outright that there’s no reason for panic whatsoever. And nor do most estate agents need to take any kind of drastic action, or even alter their typical operating methods to a significant degree.

Instead, the new legislation is being pushed as an opportunity for estate agents to take their overall compliance and diligence to a higher level – predominantly through common sense and logic. The only real difference being that estate agents will now be required to ask a series of more probing and intrusive questions than before, to identify any signs of suspicious behaviour or potentially illegal financial activity.

Which for the time being may come across as awkward and difficult, though will eventually become second nature. A standard part of the process for thousands of estate agents all over the country. Questions will need to be asked regarding savings and debts, financial commitments, salary/income and so on. Just as banks are required to both note and report any signs of suspicious activity, it’s simply the same being brought over to estate agents. With such vast sums of dirty money already being tied up and laundered in the UK property market, the time has apparently come to clamp down on its prevalence.

Not just here, but across the UK in general.

Whether the legislation sticks or remains in its current form when the UK leaves the EU in a few years remains to be seen. For the time being though, estate agents have little choice but to get on-board with the new rules.

For more information on alternative, intelligent financial solutions for property purchases and investments, get in touch with the UK Property Finance team today.

An Introduction to Wholesale Lending

The wholesale loan industry is a subject that raises quite a lot of controversy in the finance sector, with many brokers and lending facilities taking a completely opposite stance to one another whenever the issue is raised. This is particularly true where the actual value of wholesale lending is concerned. Nonetheless, the sale of such products has a number of rather unique advantages on offer, both for the lenders themselves and for those seeking to borrow.

What are wholesale loans?

Broken down to the simplest level, a wholesale loan is an affordable, modern-day lending product that allows the consumer to borrow money at specially adjusted wholesale rates. However, this is only the general theory, as the actual interest rates that are charged will vary considerably from one lender to the next.

To understand how the wholesale lending sector works, we need to consider a working example. In a typical scenario, a wholesale loan broker will acquire funds from a principal lender at wholesale rates and then pass those funds on to a consumer at their own interest rates while applying any additional fees that are required to cover the costs of handling and processing the finances in question. When the consumer repays the loan, the wholesale lender is then responsible for paying the capital back to the investor who provided the funds at the beginning, along with any accrued interest.

Why is wholesale lending becoming such an attractive option?

There are basically two driving forces behind the popularity of wholesale loans, which need to be clarified before the layperson can fully understand precisely why these products look set to stay. In the initial instance, the main investor has a lot to gain from the practice of wholesale lending, as the returns are typically much better than other investment options with similarly low risks. Although these returns may vary considerably from one deal to the next, the rewards are reliable and usually quite profitable.

Secondly, as briefly mentioned in the first point, wholesale lending is comparatively risk-free. This is because wholesale loans are generally packaged as secured borrowing products. By offering wholesale lending products as secured loans, the investor can relax in the knowledge that their funds are safe, as the wholesale lender can always retrieve any unpaid funds by means of selling the borrower’s assets should they default on the borrowing agreement.

Owing to the fact that wholesale loans are secured, they can even be offered to those with less-than-desirable credit histories and those in other potentially high-risk categories, such as the self-employed or commercial loan applicants who are unable to demonstrate a suitable level of financial performance. As a result, this ensures that demand for this particular loan type remains high.

If you would like to find out more about secured loan products, from wholesale borrowing options and commercial loans to mortgages and bridging loans, then please contact UK Property Finance today.

Debt Consolidation Simplified!

If the thought of debt consolidation leaves you somewhat confused, scratching your head in search of meaningful answers, then you are not alone. It’s a sad fact that the vast majority of us are simply unable to get from one week to the next without some type of borrowing or credit line, whether it’s a mortgage, a string of credit cards, unpaid items from the catalogue, or even a dreaded payday loan.

Of course, when you break it down to the simplest level, there are two types of debt that most of us get into. These are the debts we can realistically afford to repay, and the debts that have seemingly spiralled way beyond control that we simply don’t stand a chance of paying back on time.

What is a debt consolidation loan?

Debt consolidation loans are a relatively new type of borrowing product aimed at reducing your monthly outgoings by lowering the interest rate on existing credit and extending the repayment period as an additional means of helping you budget. With debt consolidation, the idea is to simplify life without causing any unnecessary confusion.

As a useful example, let’s consider an employee at a bank who has taken out a personal loan, makes regular, and sometimes unauthorised, use of his overdraft facility, and also has a couple of credit cards that he likes to use to keep himself afloat until the next pay check arrives. With these three credit lines alone, our friend at the bank has a total of four finance products to juggle each month, and the interest rate and charges are an additional burden that he has to deal with.

With a debt consolidation loan, it would be easily possible to pay off the overdraft, settle the credit card debts, and simultaneously make a substantial repayment on the personal loan, which would help save money while also providing an additional safety net with any funds that are left over. Whereas the previous debts were costing £250 a month with an average interest rate of ten percent, the debt consolidation loan costs just £75 per month to keep on top of, and the interest rate has been reduced to around 4.5%.

Although the consolidation loan might take a while longer to pay off, our friend is already enjoying some substantial savings on his debt, both now and in the foreseeable future.

Secured vs. unsecured debt consolidation products

If you have the required assets, a secured consolidation will probably be the best way forward. Secured borrowing products are always the more affordable option, as the lender has the added assurance that, should the borrower default, the debt will be paid back in full through the sale of any agreed assets used as security. This results in larger loan amounts being made available with less stringent borrowing criteria and longer repayment terms.

Unsecured consolidation loans are typically only available to applicants with a good credit rating. However, if you are struggling with your debts at present, the chances are that you will have missed one or two repayments in the past, so this type of borrowing product might not be available to you.

As well as consumer debt consolidation loans, there are also several commercial loans available for the consolidation of business debts. If you run your own company and are looking to reduce or lower your debts while freeing up finances for other areas of your enterprise, then a commercial debt consolidation loan could well be in your best interests.

Falling House Prices – A Good Thing or Bad?

The UK’s decision to leave the European Union has placed a great deal of uncertainty on Britain’s economic future. No doubt, this will lead one group of investors to prosperity while causing serious grief for another, particularly where the property market is concerned. To call Brexit a potential dividing line between financial success and failure for the many different types of property investors is something of an understatement, particularly where the UK housing sector is concerned.

Of course, whether the Brexit vote results in a dramatic win or a substantial loss from your own perspective will ultimately be decided by which side of the fence you have found yourself on.

Recently, the Nationwide Building Society published a report that indicated another fall in UK house prices, with most properties experiencing a drop in value of around 0.4%. This is the largest monthly fall in half a decade and the second drop within two consecutive months.

The blame for this has been directly linked to higher inflation and a notable fall in consumer spending, which have also combined with Brexit, along with a drop in GDP, to make matters worse for UK homeowners. Of course, this is not the ideal scenario for anyone looking to secure the public vote in the next election.

Both sides of the coin

The fact that house prices are falling is particularly concerning, especially when one considers the fact that UK mortgage rates are still at an all-time low. With UK unemployment also at a record low, most experts would predict that the housing market should be boosted in strength, with prices steadily increasing.

However, this is not the case, and this has meant that a large percentage of property investors and homeowners have had to sit back while their valued investments have depreciated before their very eyes. Again, this is good news for some and bad news for others.

For first-time buyers, the drop in house prices will obviously prove to be something of a major advantage. However, long-term property investors and existing homeowners will not be impressed with the status quo, although the worrying trend is expected to revert in the not-too-distant future.

Provided the Brexit vote proves to be less of a disaster than initially envisaged and the next general election ushers in a new term of government that helps the country get back on its feet, house prices could easily start to rise again at accelerated levels, although this could spell the end of the record-low mortgage rates that many investors have been taking advantage of.

Whatever actually happens next is anybody’s guess, so it stands to reason that it isn’t really in anyone’s best interests to take anything for granted in the UK housing market in the next 12 months, particularly when we consider the previous year’s events.

Bridging Loans Growing in Appeal Across Multiple Areas

It’s becoming clear that the rise and rise in bridging loan activity isn’t about to go into reverse anytime soon. 2016 brought about record growth for the industry, and this year is already off to a flying start. But what’s particularly interesting is the way in which key players are reporting not only a dramatic spike in overall interest in this kind of financing but also a dramatic change in the lenders and intended purposes of the loans being investigated and applied for.

So along with the usual commercial property development financing requirements, exactly which other areas are driving this enormous increase in overall bridging loan activity?

Domestic relocation

Well, firstly, there’s been a significant increase in the number of lenders opting for bridging loans as part of the everyday domestic relocation process. In so many instances, the delays involved while closing the sale of a currently owned property can make it difficult, or perhaps even impossible, to take advantage of outstanding purchase prospects, which may present themselves for a limited time only. In order to avoid missing out on such opportunities, many homebuyers are turning to affordable, short-term bridging loans as a means by which to purchase their dream properties while waiting for their own home’s sale to close.

Auction property sales

Likewise, outstanding opportunities often present themselves at property auctions, though meeting the payment requirements set out by those selling the properties can be difficult. Along with immediate deposits payable on the day, it is usually necessary to pay the entire balance within a matter of days, certainly no more than a couple of weeks. While conventional mortgage products are entirely unsuitable for such purposes, bridging loans are proving to be uniquely accessible and affordable for auction property purchases.

Renovation and extension

Across both domestic and commercial sectors alike, bridging loans can be uniquely convenient and beneficial when it comes to carrying out urgent building renovations, extensions, and other maintenance work. It could be that, for any number of reasons, such work is essential in order to close a sale or perhaps begin letting out the property to tenants. Where time is a factor and it is preferable to pay back the loan in a comparatively short period of time, bridging loans are proving to be incredibly versatile for urgent property work of all kinds.

Business shortfalls

Last but not least, it’s often the urgency with which the money is needed that makes bridging loans ideally suited to the needs of smaller to medium-sized businesses. From unexpected expenses to tax payments to temporary revenue shortfalls and so on, there are endless reasons why any business may need a quick yet relatively sizeable cash injection in order to prevent a potential disaster. When this occurs, working with a leading broker specialising in alternative financial products can help open the door to a variety of intelligent products and services. Gaining access to affordable and quickly available financing can often be a matter of life or death in the small business world, which is precisely why bridging loans are becoming assets of such extreme importance.

Non Status Bridging Loans – Fast Secured Finance for Any Purpose

Do you need a competitive, non-status bridging loan?

If you are looking for flexible, low-cost finance secured against your assets that won’t be affected by your credit rating or borrowing history, then a non-status bridging loan is the perfect solution. When a property owner applies for non-status bridging finance, the lender is less concerned about your financial past and more interested in the real estate that you are providing as security.

The vast majority of secured loan products are quite complicated to arrange and can take weeks to process, assuming your application is successful in the first place. Of course, many loan specialists are offering bad credit products, although the cost of borrowing is usually excessive, to say the least. With a non-status bridge loan, you can get a decision in less than 24 hours, and the funds are typically made available within 5 to 7 days.

How much can I borrow?

In most cases, non-status bridging finance is available with a loan value of up to 70% or more. However, if a borrower can provide additional security by offering a second or third property as collateral, an LTV rate of up to 100% is possible. Of course, this will entirely depend on the lender you choose to work with. By using the services of a specialist broker such as UK Property Finance, sourcing a cost-effective product that is tailored to fit your individual borrowing circumstances is effortless and stress-free.

Non-status bridge finance for any purpose

With a non-status bridge loan, you can release the equity in a property, or multiple properties, that you own and use the funds for any reason you see fit.

Common uses of this type of finance include:

  • Financing property refurbishment and development
  • Funding a property purchase while waiting for a different property to sell
  • Buying property at auction
  • Paying an urgent HMRC tax bill
  • Eliminating short-term cash flow problems in business

Bridging loans are short-term products that can be used for all manner of reasons. With low-interest rates, flexible borrowing criteria, and the option of rolling up the interest until the end of the loan term, non-status bridging loans are an incredibly attractive option that can be arranged swiftly and effortlessly, regardless of your personal borrowing requirements.

Using a Bridging Loan to Pay an Outstanding HMRC Tax Bill

If you are a property developer or business owner who is finding it difficult to raise the required funds to pay off an urgent HMRC tax demand, then a bridging loan can be a highly practical and uniquely serviceable lifeline. Although there are various sets of circumstances where HM Revenue and Customs (HMRC) may choose to grant you a payment extension, these are not always available, and failure to pay your tax bill on time can result in very serious consequences.

There are two situations where HMRC will expect and demand an immediate payment from you, and these will occur if:

  • 1) HMRC thinks you can pay now.
  • 2) HMRC is not convinced you can get your tax payments up to date.

Either way, if you are running your own business, struggling to keep up with your finances owing to unpaid invoices and other cash flow problems, and suddenly faced with an immediate HMRC demand that could destroy everything you have worked so hard to achieve, then there could be an easy way out. A bridging loan secured against your property assets could be the perfect tool that will give you the time you need to get back on your feet and back in the red.

By choosing to take out a short-term borrowing product in the form of a bridging loan, you can pay off your tax bill now and then pay off the bridging loan when you are in better financial shape further down the road.

It is, however, important to remember that bridging loans are only intended as short-term products, so you will need to think about how you will pay the money back when the loan term is about to expire.

In some cases, a bridging loan can be used as a speedily arranged, temporary fix until a more permanent funding solution is in place, such as a commercial remortgaging product or a second charge loan. Bridge financing is particularly useful in these situations, as most remortgaging and second-charge products take several weeks or months to arrange, which will not give you enough time to avoid enforcement action.

If you are a property developer faced with an urgent HMRC tax demand, then it could be that you simply need a few more months to get your project finished before reaping the dividends. Again, a bridging loan arrangement can be put into place quickly, giving you access to much-needed funds in the meantime so that you can pay off the tax bill quickly and get the work completed.

With low borrowing rates, the option to leave the interest rolled up until the end of the loan term, and the ability to secure finance against the equity tied in with multiple properties you already own, a bridging loan is a fast, convenient, flexible, and affordable solution that could solve all your HMRC tax problems quickly and effortlessly.