UK Property Finance has again surpassed forecasted targets in October and November 2014, mainly due to the number of small bridging loan completions during the months.

The firm uses the term “small” to describe loans between £10,000 and £50,000. This size of bridging finance is less popular with other bridge lenders and brokers, who tend to shy away in favour of larger loans. In fact, the lowest net-value bridging loan is usually £40,000, and many lenders require a much higher minimum net loan.

The average loan size of the small bridging loans arranged by UK Property Finance for the stated period was just under £18,000, and the average completion time was 8 working days from initial discussions to funding. The company does all the legal work on these types of loans internally, so there is a two-fold saving: no additional solicitor costs for the client, and just as importantly, this has vastly improved the completion time way beyond that which most other companies offering the same product could ever achieve. On several of the completed loans, we even managed to add a second charge to the property without needing to wait for permission from the first charge lender to be able to do so. This once again was a valuable time-saving tool for all of our clients.

Small bridging loans are available as a first charge on unregulated property or land, such as buy-to-let houses, commercial units, or land, with or without planning permission. They are also available as second charges on the same types of security and additionally on personal residential properties where the requirement for the money is mainly for business purposes or where each applicant is classified as having a high net worth and earning over £150,000 per annum.

Applications are acceptable whether the client has credit issues or not, and also if the client has or does not have income proof. The underwriting is quick, efficient, and kept to an absolute minimum so that all cases are funded within the shortest possible time frame and with the least possible fuss. Small bridging loans are available in England, Scotland, and Wales. As of yet, the only coverage we have in Northern Ireland is for larger loans starting at £50,000, but watch this space.

UK Property Finance is happy to announce that we have today completed the arrangements to fund a third-charge bridging loan of £200,000 plus interest, etc. on a client’s main residential property. The money was used to urgently purchase the office premises where his business had been trading for many years and was about to be sold to a competitor.

The residential security property in South London was valued at over £3 million and had a high street first charge mortgage of £300,000 with an excellent base rate tracker. The £ 250,000-second charge loan was from an asset finance company and was also on an excellent rate for a second charge in the region of 4% per annum. The client urgently needed £200,000 extra but, for obvious reasons, did not want to repay either his first or second charge with a higher-rate loan.

The client was a UK national but spent the bulk of his time outside the UK as a non-resident, and due to the nature of his business, income proof for traditional finance such as a mortgage or remortgage was not possible. The only finance option remaining that we could arrange was a third (3rd) charge-bridging loan.

Anyone involved in bridging finance knows of the rarity of such a product; however, bridgingloans.co.uk managed to arrange this for the client at an interest rate similar to that obtainable from most second-charge lenders.

Further complexity arose when we discovered that the client could not travel back to the UK to finalise the funding due to a medical condition. Bridgingloans.co.uk managed to locate a solicitor who had offices in both the UK and the client’s current residential location and who had the insurance required to guarantee the relevant money laundering checks, etc. required on the client whilst outside the UK. A Skype conversation also took place to complete the deal and fund the project in just over 5 days from initial contact.

The client is over the moon with how ukpropertyfinance.co.uk managed to resolve his urgent funding needs.

Following the change in regulatory body from the Consumer Credit Act (CCA) to the Financial Conduct Authority (FCA), confusion still surrounds what is and is not an FCA-regulated second charge, second legal mortgage or loan, or bridging loan on a client’s main residence.

Due to the change in requirements, it has also become increasingly difficult to locate a lender who is willing to fund these types of second-charge loans, as many lenders are not able to accept the increased supervision and constraints (such as not being able to charge a valuation fee) and, as such, have decided to completely withdraw from this sector of the market. Potentially, the FCA now regulates all second-charge loans over £25,000 that are secured on an applicant’s own home. All loans of less than £25,000 are automatically regulated.

The few exemptions on loans over £25,000 are as follows:

• If the majority (over 50%) of the loan is to be used for business purposes, The business uses will often need to be fully documented, as it will not be enough for a borrower to say that the loan is for business purposes. Examples of business uses can be related to BTL or investment property purchases, commercial property issues such as investment into the premises or purchasing the freehold, cash flow problems, purchasing stock and machinery, business start-ups, company debts, end-of-year tax payments, etc. (providing this is not a personal debt). Business borrowing is available to individuals, sole traders, or limited company directors.
• If the client is a high-net-worth individual with an annual prove-able income of over £150,000 or assets (not including their own residence) in excess of £500,000, this will also be an exempt second charge loan or bridging loan. If the application is on a joint basis, then both applicants will need to satisfy the assets or income assessment test.

The new rules are viewed by lenders in a manner that means that even a rolled-up bridging loan that requires no monthly payments is no longer acceptable if a client has limited or no proof of income.