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Repayment of bridging finance with another bridging loan
Our client was looking to borrow against an inherited property to repay an existing bridging loan secured on his own property which was arranged to consolidate debt.
The repayment strategy for the initial 12-month bridging loan had failed as the estate agents were unable to sell the property in the intended timeframe, hence the need to repay this loan as it had come to the end of its term and the current lender was needing repayment. Our client also wanted to raise additional funds to pay for medical costs and to repay money owed to family members which had accumulated during the term of the current loan, following a bereavement.
Finance raised on an inherited property
The inherited property was unencumbered and had to be transferred into our clients name as part of the transaction. UK Property Finance were able to arrange a new loan for our client whilst we used our vast industry contacts to keep in constant communication with their existing lender and solicitors to ensure they remained abreast of the situation and knew the client was doing their utmost to arrange repayment of the loan.
On agreement of the new loan the solicitor provided an undertaking to the lenders solicitors confirming that when the new loan was advanced, the inheritance duty was paid and our clients interest became listed on the property deeds as owner. The clients’ solicitor also confirmed that they would ensure the remaining advance was used to repay the existing bridging loan secured on our clients current property and the medical bills accrued.
The exit or repayment of the new bridging loan was still via sale and due to the extended timeframe agreed our client was able to sell his property without further stress and once the sale was complete our client took up residence in the inherited property which was now owned free of any loans.
What’s the Best Way to Buy Land?
Buying land for the first time can be a daunting and challenging process. Even if you’re more than familiar with traditional property procurement, buying land is an entirely different experience. From deciding where to buy land in the first place to finding the perfect land loan for your needs, there’s much to take into account along the way.
As for the ‘best’ way to buy land, the short answer is simple – as strategically as possible. In terms of where you buy the land, why you’re buying it and your chosen land financing option, it’s entirely up to you. But there are nonetheless some universal pointers to consider, which could help you make the right decision.
Examples of which include the following:
- Your main reason for buying the land
You could be looking to buy a plot of land to sell at a later date for a profit. Alternatively, you could be considering building your dream home, or even an estate of properties to rent or sell. Your ultimate intentions for the land should be factored into every decision you make from start to finish.
- The different types of land available
The type of land you buy will determine if and to what extent you can do anything useful with it. So rather than just buying a plot you liked the look of in a high-demand area, it’s worth first considering its usefulness and versatility or otherwise.
- Funding solutions
Addressing the issue of how to finance land investments, there are myriad options to explore. From specialist land loans to development finance to bridging loans to agricultural loans, it depends on your current financial circumstances and intentions for the land.
- Compare the market
How much is agricultural land per acre to buy? How long is a piece of string! The answer will vary significantly from one area to the next, in accordance with both demand and the capacity for the land to generate healthy returns. Hence, it can be useful to compare the market and consider a variety of locations where possible.
- Consider planning permission requirements
Assuming you plan on developing the land you purchase in some way or another, it’s worth factoring in any planning permission requirements you may need. Depending on the type of land you purchase, it could be easy, difficult or impossible to receive formal permission to develop or build on it. Always better to find out before you go ahead and commit to the purchase.
- Organise a reliable survey
As with any property you intend to purchase, it’s important to have the land meticulously and professionally inspected from top to bottom. From flood risks to boundaries to potential hazards of all shapes and sizes, it’s impossible to evaluate the value and potential of a plot of land with a fleeting glance.
- Focus on future demand
Rather than considering what the plot of land is worth today, think carefully about its ongoing growth potential. For example, if the area is scheduled to benefit from improved public transport links or the development of an industrial park in the near future, this could have a marked impact on the value of your investment.
- Secure professional representation
Last but not least, it always pays to have the experts on your side when considering an important investment. So rather than going it alone, secure professional representation from the earliest possible stage from a reputable independent specialist. Even if you know what you’re doing, an additional objective viewpoint could prove invaluable.
Mortgages Brokers vs Bridging Specialists
Comparing mortgage brokers to bridging specialists is a little like comparing apples to oranges. They both exist for a reason and have their own benefits, but they are nonetheless very different entities.
The popularity of bridging finance continues to grow at its fastest-ever pace. Nevertheless, the vast majority of borrowers in need of sizeable sums for property purchases turn instinctively to mortgage brokers. The problem is that the vast majority of mortgage brokers in the UK lack the knowledge and experience to advise on alternative funding solutions.
In fact, it is estimated that less than 20% of mortgage brokers in the UK have no idea what bridging finance is or its intended applications. Let alone the expertise required to advise on bridging financial options.
The traditional mortgage broker
As the name suggests, a traditional mortgage broker is usually an independent adviser for current and prospective mortgage borrowers. They take into account the requirements and preferences of the applicant, consider their available budget, and scour the market for appropriate mortgage deals. Some work exclusively with major High Street banks, while others also consider loans from specialist lenders across the UK.
However, no allowance is typically made for the consideration of alternative funding solutions. Dozens of conventional mortgage and remortgage products may be analysed, evaluated, and presented to the client, but that’s all. If an entirely different funding solution (such as a bridging loan) represented a better option for the client, a typical mortgage broker may be unable to advise on it accordingly.
Bridging specialists
In a similar vein, alternative funding specialists work closely with major high-street names and independent lenders across the UK. They’re also able to offer comprehensive support and objective advice on all aspects of mortgage borrowing.
The difference is that a bridging specialist can also provide access to an extensive range of alternative funding solutions. From traditional bridging loans and development finance to a variety of accessible and flexible secured borrowing options, there’s far more on the table than traditional mortgages alone.
As a result, the borrower stands a much better chance of finding the perfect funding solution to suit their requirements and budget.
Accessible and affordable
The market for mortgages in the UK has traditionally been somewhat restrictive. In a working example, an individual with a poor credit score or no recent proof of income may be counted out of the running, irrespective of their current financial status.
One of the biggest differences with bridging loans (and other alternative funding solutions) is the consideration of all cases by way of individual merit. So even those who may have been turned down by multiple major High Street names could still access the financial support they need with the help of an independent specialist broker.
For more information on the potential advantages of working with an established bridging specialist, contact UK Property Finance today for an obligation-free consultation.
Bridging Loan Offer in 2 Days and Completion in Less Than 7
Having been rejected for a mortgage, our client was now looking for a bridging loan to buy a new residential property before his current one sold. The loan was to be secured on the purchase property only, as it was of enough value to borrow the loan required and because the client’s current first charge lender would not allow a second charge consent on the current residential. The rest of the purchase price was made up of savings.
UK Property Finance has access to all the main premium rate lenders in the market, which also allows us access to many special rates starting at below 0.4%.
“This was no ordinary house”
The client was looking to exit the loan by mortgaging his purchase property. However, the finance was not available at this stage due to the client’s lack of the first full year’s accounts from his new business venture. The mortgage had been declined, leaving him short of time to complete the purchase of his desired property. This was no ordinary house, as was soon revealed; it was once owned by the client’s parents and was where he had spent much of his childhood. The considerable sentimental value to our client spurred the team to find a resolution.
“The dream team quickly assembled into action”
Indeed, due to the time taken before contacting UK Property Finance, the vendor had now threatened to pull out of the sale if completion did not occur within one week. We were told of the urgency during our very first contact with the client and following an initial fact-finding process.
The dream team quickly assembled into action and instantly provided a quotation for the client’s requirements. The client wanted to proceed, so within 2 hours we had obtained an agreement in principle at the most competitive rate in the market. UK Property Finance also negotiated with the lender to allow an automated valuation, which would make the process much quicker. The team immediately created the finance pack and uploaded it to the document collection company, which met the client at 8 p.m. that evening, by upgrading to a premium service. By the time we opened for business at 8 a.m. the next morning, the finance pack had already been scanned and emailed back, so it could be rapidly submitted to the lender.
By liaising closely with the lender, who lost no time in completing the underwriting and automated valuation, this enabled an offer to be received on the same day of submission. The offer also went to the lenders and the client’s solicitors, who had been warned about the urgency of the case. Even with some minor delays, UK Property Finance continually chased this regulated bridging loan to complete within a week of initial client contact. Continued support for our client meant UK Property Finance could arrange a mortgage for the client to repay his bridging loan within 3 months of funding.
UK Property Finance is not just a bridging loan specialist and can offer many different lending solutions. To find out how we can support you, please contact us at 0116 402 7982.
The Myth of Bridging Loans Unveiled
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.
Regulation of Bridging Loans in the UK
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.
Bridging Loan Secures Couples Dream Home
Moving home can be stressful enough without the added stress of selling two properties rather than one. Finding your dream home can be a once-in-a-lifetime experience that few get the opportunity to enjoy. A couple looking to relocate to the coast had found the one, but time was of the essence. The clients had two properties on the market that they needed to sell in order to buy them; however, their dream property wouldn’t wait.
Afraid they were going to lose the house, the couple needed to find a way of becoming proceedable while they waited for a buyer to come along for theirs.
The clients approached UK Property Finance with their brief, and the team set about looking for a bridging loan that could secure the forever home. The current two properties owned by the couple could be used as security against the loan. A lender had been selected on the grounds that they required a comfort charge on the second property as the equity from both properties was needed for the exit of the bridging loan. Having a comfort charge instead of a standard charge on the second residential property reduced valuation fees and made the application quicker, particularly as the couple were keen to secure their next property so quickly. The couple had already exchanged contracts, which meant they were legally bound to timescales and risked losing their deposit if they did not complete them.
The team at UK Property Finance were told at the beginning about the tight deadline, which allowed them to prompt all parties to keep things moving. Successfully, UK Property Finance managed to complete the process a day ahead of schedule, allowing a day to move funds. Throughout the process, the clients were given regular updates, so they knew each milestone and knew we were achieving their target. The couple is now living their best lives in their new home, all thanks to our ability to find a lender with a market-leading rate not available from many other brokers with a comfort charge instead of a full charge on the exit.
If you would like to find out how UK property finance could do the same for you, then please email us at [email protected].
UK Property Finance Rescues Client From Lender Deadline
Clients often have challenging deadlines in unusual locations, and this case is no exception. In recent years, we have dealt with some fairly unique properties, but an old telephone exchange is certainly a first. On a wind-swept hill in Buxton, Derbyshire, our client was nearing completion, having already made the property wind- and water-tight. Unfortunately, due to the length of the task at hand, he had overrun the loan term agreed upon and consequently found the site being reposed by the bridging and development lender. Alarm bells certainly began to ring for the eager investor as the receiver was looking for an early auction sale to recoup the current lender’s loan. Our plucky investor felt this project could continue if he could get a resolution through UK Property Finance. The odds were greatly out of favour, and his good credit history faced being decimated because the loan had been given a personal guarantee for repayment. If it became public knowledge that this was now a repossession, the prospective profit gained would be eradicated by the achieved sale price and mounting costs.
The anxious investor knew where to turn with a phone call to UK Property Finance following a recommendation from a fellow developer. Understanding the depth of the issue over a lengthy conversation with our advisor highlighted the lack of equity in the project. Additional security was required to enable the buyback and complete the remaining work. Family can always be relied upon to send in the cavalry when the going gets tough. The clients’ sister managed to offer a lifeline with her residential home as security regardless of having a mortgage already against the property.
Grit and determination certainly paid off when we obtained a finance agreement in both names to repay the current bridging loan with a bridging loan secured via a first charge across the development site and a second charge on his sisters’ property. In dramatic fashion, the client managed to halt the auction, going ahead with the funds to complete the project. The pressure has subsided, meaning the client could focus on completing the project to maximise profits. His sister not only got to help her sibling in desperate times but also had the charge released from her property and a welcome financial bonus for her trouble.
The complexity of this case and the time scales bearing down meant UK Property Finance had to strategically and carefully select the ideal lender for this case. A fantastic result for everyone involved, and the investor lives to fight another day.