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Bridging Loans Are the Buy to Let Investor’s New Top Choice

It’s not uncommon for buy-to-let investors to set their sights on properties in need of repairs and refurbishment. The reason being that, as competition for such properties is relatively low, they can often be picked up at rock-bottom prices. After which, the repairs and refurbishments can be performed at an equally low price before turning a profit on the property by letting it out to tenants.

Unfortunately, targeting properties in need of renovations or refurbishments can lead to problems with financing the purchase. This is because the vast majority of traditional lenders will only issue mortgages against properties that are considered habitable at the time of the application. Even if you can demonstrate your intention and capacity to renovate the property after the purchase, you’re unlikely to qualify for a traditional mortgage.

In addition, landlords often seek to expand their buy-to-let property portfolios by purchasing homes at auction. Some are in need of repair; others are perfectly habitable. In both instances, however, it is usually necessary to pay the full purchase price of the property (and any additional fees) within 28 days, sometimes sooner. Needless to say, this is nowhere near enough time to organise a traditional mortgage.

Combined with the increasingly restrictive lending criteria of major banks for buy-to-let landlords, all of the above places prospective investors in a tricky position.

A flexible and accessible alternative

This is precisely why bridging loans are fast becoming the new top choice for buy-to-let investors. A dynamic and flexible type of secured lending, bridging finance goes far beyond the limitations of traditional high-street mortgages.

For one thing, most bridging finance specialists are uninterested in the condition of the property. Even if it is in a pretty sorry state of repair, it has no real consequence for the lender. Instead, the only thing that matters is the borrower’s capacity to cover the loan with acceptable collateral. This may be provided in the form of the property being purchased or any other property currently owned by the applicant.

Likewise, bridging finance can be uniquely convenient and accessible for purchasing buy-to-let properties at auction. Irrespective of how much money is needed, it can typically be organised and transferred to the applicant within five working days. Again, it’s simply a case of the applicant putting up the necessary collateral to cover the loan. The nature and condition of the property being purchased are of no real interest to the lender.

What matters most with a bridging loan are two things: collateral and a viable exit strategy. By exit strategy, this means a clear and validated method of gaining access to the money needed to repay the loan on the agreed date. It’s possible to take out a bridging loan without an exit strategy, but this may, depending on the lender and the loan, result in higher overall borrowing costs.

Speaking of which, the potential value for money of a super-short-term bridging loan also appeals to buy-to-let investors. In many instances, it’s possible to borrow significant sums of money for less than 0.5% per month. Just as long as the loan is repaid quickly (in accordance with the agreement of the lender), overall borrowing costs can be kept to absolute minimums.

The importance of comparing the market

Now more than ever, the importance of comparing the market in full cannot be overstated. Particularly when considering buy-to-let investment opportunities, it is essential to consider as many deals as possible from as many lenders as possible.

The quickest and easiest way is to take your case to an independent broker, who can compare deals from a panel of specialist lenders on your behalf.

Bridge the Gap to Own a Holiday Home

The housing situation for most would-be buyers in the UK right now is pretty bleak. Particularly for first-time buyers, millions of whom face the prospect of never owning their own home.

But what’s interesting is how, at the opposite end of the spectrum, individuals interested in buying second homes (or holiday homes) are increasingly setting their sights overseas. Given the inevitable complications of buying abroad, why are there more Brits than ever before considering international property investments?

The overseas property market

For most, the primary motivating factor is affordability. In some regions, average property prices have plummeted by as much as 70% over recent years alone. As a result, Brits buying abroad are able to make their budgets stretch considerably further than they would at home.

What’s more, the desire to snap up bargain properties while the opportunity exists is prompting a growing number of borrowers to consider more immediate short-term loans.

Florida has become an appealing investment prospect for more British homebuyers than ever before. Primarily due to sub-prime issues, average house prices in several attractive regions across Florida have fallen by more than 70%. Over in Spain, research suggests there are currently more than 700,000 unsold holiday homes, which are plummeting in value all the time. In addition, average house prices in several key coastal regions have fallen by around 50%.

For some, the appeal lies in the prospect of purchasing an attractive overseas property to let out. For others, it’s a case of being able to pick up a dream holiday home at a bargain price. Or perhaps a second home to eventually move to for permanent residence during retirement.

No matter how extensive or limited their budget may be, would-be buyers are finding overseas investment opportunities near irresistible.

Local mortgage complexities

One of the biggest obstacles standing in the way of overseas property ownership tends to be arranging finance. For obvious reasons, getting a local mortgage from an overseas lender can be far more complex than organising a mortgage at home. Lending criteria and eligibility in general differ significantly from one lender to the next, as do interest rates and borrowing costs.

For most, it’s a case of hiring a local lawyer and/or real estate expert to represent them in their absence. All of which means further costs and complications. It can also be a time-consuming process, which isn’t ideal when the intention is to secure a bargain property while the opportunity exists.

Bridging loans to purchase overseas homes

This is perhaps why bridging loans have become a popular choice among Brits buying abroad. With so many quality properties being sold for exceptionally low prices, it’s very much a case of first come, first served. Procrastinating for as little as a few days could see the property of your dreams being snapped up by someone else.

Traditional mortgages (at home and abroad) have a tendency to take several weeks to arrange. With a bridging loan, the money needed to pay for a property outright can be accessed in as little as three days. Just as long as the applicant has sufficient collateral to cover the cost of the loan, the application process can be surprisingly simple.

Of course, the key proviso with a bridging loan is ensuring you have a valid exit strategy. That being, a plan for repaying the loan in full a few months down the line Bridging loans are therefore unsuitable for buyers looking to spread the costs of their property purchase over several years, but they can be uniquely cost-effective for those able to repay more promptly.

Independent advice

With such a broad range of options available for financing an international property purchase, it’s important to seek independent advice at the earliest possible stage. Consider the available options, establish your budget, and conduct a whole-of-market search in order to ensure you get the best possible deal from a reputable lender.

Economy Growth or Slow Down?

The United Kingdom is currently facing a period of uncertainty unlike any seen since the end of the Second World War. Considering Great Britain’s entirely uncertain position in Europe and the rest of the world over the coming years, it’s almost impossible to predict what’s to come next. Nevertheless, the latest figures have painted a less than reassuring picture about the country’s economic performance.

According to the latest figures from the Office for National Statistics, the United Kingdom economy experienced growth in May after a decline in April. However, not to such an extent as to quash widespread fears of a severe slowdown to come. Specifically, the economy experienced growth of 0.3% in May, following a decline of 0.5% in April. Total growth over the three months leading up to May came out at the same 0.3%.

This would appear to be a positive result, but experts are predicting further shrinkage in the months to come. The official figures for the second quarter are not scheduled to be released until August, though they are not expected to make a particularly reassuring reading.

Carmakers return to work

One of the key factors driving the temporary economic growth record in April was the partial return to production for several major carmakers. A series of temporary factory shutdowns ahead of a scheduled March Brexit inflicted enormous damage on the UK’s vehicle production output and the economy as a whole.

This partial recovery in car production contributed to the 0.3% economic growth recorded for May, which didn’t come close to making up for the decline in the previous month. Experts insist that all such monthly figures should be taken with a pinch of salt due to their volatility and unpredictability. Nevertheless, all signs indicate a further economic slowdown over the coming months in the run-up to another scheduled EU departure.

“We project UK growth to dip to 1.1% in 2019 and to strengthen only moderately, to 1.6% in 2020. Slow growth this year reflects the drag on business investment from ongoing economic and political uncertainty relating to the outcome of the Brexit process. Our main scenario assumes an orderly exit from the EU with a transition period, with business investment and GDP growth picking up later in 2019 and in 2020. But short-term risks are weighted to the downside due to the possibility of a more disorderly Brexit.” Price Waterhouse Coopers

The value of the pound has also plummeted more than 5% against the world’s three biggest currencies in recent weeks. A decline that is also predicted to continue for some time.

Growing brexit uncertainty

Had the government gotten its way, the United Kingdom would have already been outside the European Union for some time right now. As it stands, we’re no closer to knowing what’s ahead than we were at the time of the referendum. Uncertainty has had a more drastic and wide-reaching impact on the UK’s economic performance than anyone could have predicted.

As it stands, the United Kingdom is now scheduled to leave the European Union on or before October 31. Nevertheless, we’ve got no realistic way of even knowing who will be in power at the time. Or whether Brexit will actually go ahead or not. From the biggest businesses to the average UK household, nobody is willing to make any major financial decisions while such uncertainty continues. The result of this is the sluggish economic performance we’ve seen as of late, which isn’t likely to see a turnaround anytime soon.

Do Bridging Loans Still Have A Bad Reputation?

It’s fair to say that bridging loans landed in the United Kingdom with an initially shaky reputation. For the most part, short-term loans in general have always been viewed with a certain amount of scepticism. Particularly in instances where non-payment leads to heavy penalties in a relatively short period of time.

Today, UK borrowers and financial watchdogs alike are beginning to view bridging loans in an entirely different way. Whichever way you look at it, bridging finance has the potential to provide an invaluable lifeline in a time-critical situation. Nevertheless, this doesn’t mean that bridging loans are always the most appropriate or economical option.

They are one of hundreds of unique financial products available on the UK market, with their fair share of advantages and disadvantages.

Considering all available options

Accessing the most appropriate financial products for any given requirement means considering as many options as possible. The easiest way of doing so is to contact an independent broker, who can compare the market in its entirety on behalf of the borrower.

Should it be decided that a bridging loan is the way to go, it’s important to consider all the advantages and disadvantages ahead of time. A bridging loan could prove invaluable when time is a factor, but it should never be applied for without careful consideration.

The advantages of bridging loans

As far as advocates are concerned, the most appealing advantages of bridging loans are as follows:

  • Bridging loan applications can be completed, processed, and finalised in a matter of hours. Across the board, bridging finance is exponentially quicker and easier to access than a comparable high-street loan.
  • Borrowers have the option of repaying the loan in its entirety in one lump sum on a predetermined date. For some, this is preferable to the usual monthly instalment approach.
  • Lenders often demonstrate a fair amount of flexibility with the collateral they are willing to accept to cover the cost of the loan. This makes bridging finance ideal for property refurbishments and redevelopment projects.
  • Poor credit applicants are not necessarily counted out of the running, as eligibility is usually determined exclusively on the basis of collateral. Even if you have an imperfect credit history, you can still qualify for a bridging loan in no time.
  • Bridging finance can be great for taking advantage of time-limited investment opportunities, such as purchasing properties at auction.

The disadvantages of bridging loans

As for the downsides, the following should be taken into account before applying for a bridging loan:

  • There are typically no allowances for repaying bridging loans over longer periods. Loan terms usually last 6 to 24 months, maximum.
  • Penalties and additional interest charges can be particularly steep in the case of non-repayment of the loan. It’s therefore important to carefully consider your financial status before applying.
  • As bridging loans are secured loans, your property may be at risk of repossession if you fail to meet your repayment obligations as specified in the contract.

In terms of reputation, there will always be those who favour one type of credit over another. Nevertheless, evidence would seem to suggest that more businesses and everyday borrowers than ever before are considering or applying for bridging loans.

At the right time and with the help of a responsible lender, bridging loans can be surprisingly affordable. They can also be the only realistic option on the table in time-critical situations. If you simply cannot sit around for days or weeks on end for a bank to make up its mind, bridging finance could be the answer.

Top 10 Issues with Planning Permission Applications

For homeowners and professional developers alike, planning permission issues are anything but uncommon.

Where issues with planning permission stand between you and the successful completion of an important project, the frustration can be unbearable. Particularly in instances where planning permission is rejected on the grounds of a simple oversight or application error.

So to help future candidates with their applications, here’s a quick rundown of the 10 most common mistakes and general issues with planning permission applications:

  • Justifying your project on someone else’s: Just because someone else in the vicinity has been permitted to do whatever it is you intend to do doesn’t immediately validate your application. All decisions are considered by way of individual merit, and the goalposts are being moved all the time. Hence, making too many comparisons or references to someone else’s project really isn’t the way to go.
  • Submitting too much information: Leaving out important details is never advisable, but there’s also such a thing as including too much information. Applications must be complete, but they should also be as concise and digestible as possible.
  • Designing before buying a plot: Planning permission applications are considered by way of the prospective project’s potential to complement its surroundings and neighbouring buildings. As a result, it’s risky to go ahead and start designing a property or building before you’ve found the perfect place for it.
  • Over-egging eco claims: Environmentally friendly projects are far more likely to be given the go-ahead than their polluting counterparts. Nevertheless, if you base your application heavily on eco claims, you can expect your application to be scrutinised even more aggressively than normal.
  • Altering your design after commencement: When the project is underway, you may change your mind about various aspects of the final build. Unfortunately, anything that deviates from the precise plan you submitted could result in the planning permission being withdrawn.
  • Overlooking local politics: Your project may not break any formal rules, but sizeable opposition from local residents could scupper your plans. If possible, it’s a good idea to get as many people on your side as possible prior to submitting your application.
  • Expecting an easy ride: Your planning permission application process may be smooth and simple, but it could also be an unmitigated nightmare. Expecting an easy ride is a recipe for disaster; it’s far better to plan for every eventuality and be ready to plead your case in minute detail.
  • Entrusting substandard tradesmen: Most builders and traders in general will be happy to help in some way with your planning permission application. Nevertheless, this doesn’t necessarily mean they know what they’re doing. What’s more, their reputation and stature may have an effect on the way your application is interpreted and assessed.
  • Underestimating the costs: Basic planning permission application fees aren’t particularly extortionate. However, you also need to factor in any other assessments, surveys, and reports that will need to be carried out by the council prior to approving your application. Most of which you’ll be expected to pay for, or at least heavily subsidise.
  • Applying at the last minute: Last but not least, local councils typically recommend an average application processing time of up to eight weeks. Nevertheless, there’s every chance it will take significantly longer than this for all checks to be carried out and for approval to be granted. If the project you have in mind has any formal deadline whatsoever, you need to think about applying for planning permission at the earliest possible stage.

What Is a Second Charge Loan or Mortgage?

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.

Has It Become Socially Acceptable to Discuss Salaries Openly?

At some point or another, we were all informed of the politeness (or otherwise) of asking other people how much they earn. It’s all part and parcel of growing up and getting into work—we’re programmed from an early age to avoid the subject of salary at all costs.

To such an extent that even in today’s enlightened and liberal 21st-century society, discussing our salaries can be the ultimate taboo.

But it seems the winds of change are blowing for a new generation of millennials, who, unlike their formal and stuffy predecessors, aren’t nearly as afraid to talk cash. In fact, a report published by The Cashelorette found that almost two-thirds of millennials (63%) between the ages of 18 and 36 have talked about their salaries with their family members. Moreover, 48% have discussed what they earn with their friends, and 30% have talked about their take-home pay with their co-workers.

By contrast, little over 40% of adults aged 53 to 71 stated that they discuss their salaries with family members, 21% shared salary information with their friends, and just 8% talked about what they earn with their colleagues at work.

This would seem to suggest that younger generations find it more socially acceptable to discuss salaries openly than older generations, but does this add up to a good thing? Are there positives to be taken from discussing salaries openly, or is it a personal and private subject that’s best kept under wraps?

The importance of workplace transparency

A number of experts have already shared their thoughts on the subject, and the majority have reached the same conclusion. In an organisational setting of any kind, transparency has the potential to be enormously positive. When members of a workforce share information about their salaries openly with others, there’s none of the typical scepticism and scrutiny that surrounds salary secrecy.

Roughly translated, if you know exactly how your pay compares to that of your peers, you understand your position and the extent to which you are valued. Assuming you’re all paid pretty much the same (in accordance with experience), knowing this makes it easier to feel part of a cohesive team and focus on the job accordingly.

By contrast, when workers have no idea how much their counterparts are being paid, they may assume they’re being underpaid and undervalued. Even if this isn’t the case, they’ve got no way of finding out for sure and could therefore reach misguided conclusions. It’s the classic case of ensuring everyone is on the same level and treated in the same way when doing the same job.

Of course, this isn’t the way the vast majority of businesses operate.

The issue of salary secrecy

From the moment new recruits are brought on board, salary secrecy can be problematic. For example, by keeping the salaries of employees secret, employers enjoy an enormous advantage during the negotiation process. The same also applies to interviews for promotion and general career development, wherein the applicant may accept a salary exponentially lower than that of their colleagues.

Salary secrecy is also blamed for the perpetuation of the wage gap between female and male employees. As there is no requirement for employees to openly discuss or disclose their salaries, men and women doing the same job can get away with receiving very different rates of pay.

Of course, confidentiality legislation provides employees and employers with certain protections regarding salary disclosure. Hence, it’s unlikely that sweeping reforms will be implemented anytime soon, resulting in complete disclosure and open discussion of salaries in the workplace.

Still, it’s reassuring to learn that younger generations are gradually eradicating the taboo that’s held back honest and open discussion for so long. If true equality in the workplace is to ever become a reality, open discussion of salaries could be an important part of the process.

Bridging Loans Can Help with VAT Too

At a growing pace, bridging finance is becoming a force to be reckoned with in the UK’s specialist lending market. Providing rapid access to significant sums of cash for just about any purpose, bridging loans take convenience, flexibility, and accessibility to an entirely higher level.

But even at this stage, the true versatility of bridging finance isn’t what you’d call common knowledge. You may associate bridging loans with fast-paced property purchases, but how about a bridging loan for VAT?

For commercial property investors and developers, an affordable bridging loan to pay VAT can provide a welcome lifeline at a critical juncture.

What is a bridging loan for VAT?

As you’ve probably figured out by now, bridging loans for VAT are short-term loans that can be used to pay the VAT on a commercial property purchase. As things stand right now, the vast majority of commercial property purchases (where the property is less than three years old) require a 20% VAT payment. The VAT must be paid on top of the price of the property at the time of its purchase, which can significantly elevate the costs of the transaction.

The more expensive the property, the greater the VAT outlay for the buyer.

Of course, commercial property buyers go on to claim this VAT back from HMRC at a later date. The problem is that, depending on the specifics of the case and application volumes at the time, it can take as long as three months for refunds to be actioned. During which time, the investor could be left somewhat out of pocket.

Loans and specialist credit facilities in general are frequently used by investors to cover VAT costs, but none have proven quite as flexible or affordable as the bridging loan.

How a VAT-bridging loan works

As with all bridging loans, a VAT bridging loan is offered as a short-term credit facility for a specific purpose. In this instance, the borrower is able to apply for a minimum of, say, £50,000 with no upper limits, secured on their existing property or qualifying assets. Applications can be processed and funds delivered in as little as five working days, after which the full balance is repaid on an agreed date. Bridging loans can be arranged over terms of anything from a few days to 18 months, in accordance with the preferences of the borrower.

The lender makes the money available as quickly as possible, the borrower uses it to pay the VAT, and the property purchase goes ahead. When the VAT is refunded by HMRC, the funds are used to repay the loan in full, along with any additional borrowing costs incurred. The quicker the loan is repaid, the lower the overall borrowing costs and the simpler the transaction in general.

Affordable short-term VAT loans

Some of the UK’s leading bridging specialists offer short-term loans with rates of interest as low as 0.5% per month. All with minimal additional borrowing costs, arrangement fees, and general levies. Just as long as the balance is repaid in accordance with the loan agreement, bridging finance can be uniquely cost-effective.

Along with near-immediate access to the funds required, a key benefit of bridging finance is the elimination of credit checks. If the applicant is able to provide sufficient collateral to cover the loan, there’s no requirement to undergo a credit check or provide proof of income. No deposits, no delays, and no unnecessary complications, ideal for covering VAT costs when time is a factor.

Just be sure to consult with an independent broker before penning your application, which will help ensure you find the best deal from an extensive panel of specialist lenders.