Marijana No Comments

Is A Bridging Loan Right For You?

Like all financial products, bridging loans are more suitable for some applicants than others. For the most part, people tend to associate bridging loans with financing to ‘bridge’ the gap between property sales and purchases. In reality, a bridging loan can be used for pretty much any legal purpose whatsoever.

Bridging Loans: The Basics

One of the best ways of getting to grips with the basics of a bridging loan is to check out an online bridging loan calculator. Enter a few simple details, hit the button and learn how bridging finance works. See how rates vary in accordance with several key variables and determine your capacity to meet your repayment obligations, should you decide to go ahead.

Understandably, bridging loans are available exclusively for applicants aged 18 years or over. Open to private and business borrowers alike, bridging loans are almost always secured against the applicant’s property, which can be a commercial or residential building. Multiple properties may also be combined to cover the cost of a bridging loan, while some lenders will consider other valuable assets on a case-by-case basis.

Bridging loans can be particularly useful for borrowers with an adverse credit history, along with those who are unable to provide comprehensive proof of income. Just as long as sufficient collateral can be provided to cover the cost of the loan, the funds required can be made available in as little as five days. After which, it’s a case of repaying the loan in one lump-sum payment, anything from a few days to around 18 months later.

Bridging Loan Suitability Examples

Producing a definitive list of bridging loan suitability examples is difficult, given the enormous flexibility of bridging finance. Nevertheless, there are certain common examples and applications for bridging loans that make full use of their unique properties.

Examples of which include the following:

  • You intend to buy a property at auction and do not have sufficient funds on-hand to cover the costs. In such instances, applying for a traditional mortgage in the conventional way is simply out of the question.
  • A homeowner or developer wishes to finance extensive renovation, extension or home improvement works, in order to increase the market value of a property which will subsequently be sold.
  • The prevention of repossession, using a bridging loan to pay off an outstanding mortgage balance, prior to selling the property for its full market value, repaying the loan and retaining any additional profits made accordingly.
  • A business owner faces an unexpected financial shortfall, which calls for an immediate yet short-term cash injection. Bridging loans can typically be secured against a variety of business assets and commercial properties.
  • When a homeowner looking to relocate finds their dream property at an unbeatable price, but the sale on their current property hasn’t been finalised. They purchase the home of their dreams with a bridging loan and repay the balance in full when their former home is sold.
  • An investor or everyday buyer wishes to purchase a property a traditional mortgage provider refuses to finance. Examples of which could be partially-built properties or properties with major structural issues, which can be purchased quickly and affordably with a bridging loan.

These are just a few examples of some of the most common applications of bridging loans in private and professional circles alike. Across the board, bridging finance specialists are able to tailor their loans and associated terms to meet the exact requirements of each borrower individually. All with monthly interest rates as low as 0.5% — sometimes even lower!

Eligibility for a bridging loan is typically determined exclusively on the provision of acceptable collateral. Most of the usual measures like credit checks, proof of income and general financial history simply do not apply.

If you think a bridging loan is right for you, speak to an independent broker and organise a whole-of-market comparison, before submitting your application.

Source: Shout Out UK

Marijana No Comments

ASTL members up lending by 39% year-on-year

Association of Short Term Lenders firms (ASTL) increased the value of bridging lending by 38.9% in the third quarter of 2017 compared to the same quarter in 2016.

However lending saw a small fall of 2.7% from the second quarter of this year.

Benson Hersch (pictured), chief executive of the ASTL, said: “The figures from our members show that the bridging finance industry is in excellent shape.

“It shows that the industry has remained resilient despite the threat of Brexit and low growth in the economy.

“The figures also demonstrate that bridging loans remain an excellent alternative where traditional financing is not immediately available for customers.

“The bridging sector therefore continues to provide a vital role in the economy by offering customers access to the capital they need in a responsible and sustainable way.”

The value of their loan books stand at £3.5bn after rising by 27.7% from the end of Q3 2016 to Q3 2017.

Source: Mortgage Introducer

Marijana No Comments

Bridging loan volume dips in Q3

Bridging volumes fell by 4.9% in Q3 but remain some 2% higher than last year, data from Bridging Trends has shown.

The firms that contribute to Bridging Trends reported that gross lending had dropped to £142.75m

The split between first charge and second charge lending stood at 82% and 18% respectively indicating consistent investment in residential properties-to-let.

And Joshua Elash, director at MTF, said in regards to unregulated bridging continuing to dominate the landscape: “The implementation of the Prudential Regulatory Authority’s rules relating to the treatment of portfolio landlords means this upward trend is likely to continue for the foreseeable future.

“Increasingly larger number of professional property investors will consider bridging finance when purchasing a new property which they otherwise intend to refurbish and sell.”

Chris Whitney, head of specialist lending at Enness Private Clients, added: “I think when you keep in mind the fact that this was over the summer holiday, a drop of only about 5% in lending volumes compared to the last quarter is actually quite impressive.

“I was surprised the average interest rate hadn’t fallen further than it has. We have seen pricing under quite a bit of downward pressure as certain lenders fight to increase market share and protect what they already have from new entrants.”

Additionally the data found that mortgage delays were the most popular reason for taking a bridging loan and the average duration of a loan stood at 12 months.

Average LTV levels reached almost 50% with the average monthly interest rate across first and second charge lending decreasing to 0.82% from 0.84%.

Source: Mortgage Introducer

Marijana No Comments

Bridging in probate

Bridging loans are incredibly flexible and may be put to a variety of uses including resolving probate issues when concluding a will.

When a will is presented between various parties, it can throw up financial hurdles. There are numerous benefits to be gained by fast tracking the settlement process and using a short-term finance solution to meet resolution.

Annual bridging lending grows for third consecutive quarter

By using bridging, beneficiaries of a will are able to pay legal fees and inheritance tax straight away, releasing 70% of the value of the property immediately without making any interest payments which are covered by the loan facility.

This ultimately allows the beneficiary to market the property for a longer period of time to maximise its value which will be far greater than the interest payments on a bridging loan, rather than discounting the property for a quick sale or through auction.

Resolving debts

Carrying out someone’s will is not always as straightforward as we might like. Although the ownership of their various assets might be easy enough to resolve, the average person will take on a network of debts and credits which must be resolved in their will.

Bridging finance offers a person’s family some breathing space and they can use the loan to pay off debts instead of being forced to sell assets as quickly as possible. Bridging lenders are also highly flexible and quick to put solutions in place. There’s no red tape and it’s possible to create a loan structure that’s perfectly suited to individual circumstances

In many ways, a bridging loan for probate finance is very similar to a standard bridging loan. The loan will generally be for a short fixed term, commonly less than 12 months (though longer terms are available), and can be of any value from tens of thousands to tens of millions of pounds.

Inheritance tax

When concluding a will, beneficiaries will inevitably face tax implications which must be factored into the overall process. Again bridging can help streamline and manage this inevitable challenge by providing a quick fix solution.

Many estates in the UK become liable for inheritance tax, which must be paid within six months and typically a 40% share of the estate upon liquidation. Again, this financial pressure can be eased through the use of bridging finance, as it enables the will’s executors to restructure and refinance to meet the cost of inheritance tax.

Conclusion

Without bridging finance it would be very difficult to resolve the financial affairs that can be brought about in a deceased person’s will.

The time pressures that quickly become apparent would require that many estates be quickly broken down and sold, rather than being realised at their full value. Bridging loans are therefore a helpful tool that enables individuals to pass on their wealth through generations, and allows inheritors to benefit more from their parent’s estates.

Source: Mortgage Introducer