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How is interest calculated?

Most lenders retain interest, and a minority roll it up and if you have plenty of surplus cash per month you might get serviced.

Retained and rolled up interest is deducted from the amount you wish to borrow. 

You have to find sufficient funds to cover the interest for the period of the loan as well as the deposit. 

Retained is the most common and for the majority of the lenders this is the only option you have.

Serviced is like a traditional mortgage when you are allowed to pay the monthly interest from your income. 

How is interest calculated?

Most lenders retain interest, and a minority roll it up and if you have plenty of surplus cash per month you might get serviced.

Retained and rolled up interest is deducted from the amount you wish to borrow. 

You have to find sufficient funds to cover the interest for the period of the loan as well as the deposit. 

Retained is the most common and for the majority of the lenders this is the only option you have.

Serviced is like a traditional mortgage when you are allowed to pay the monthly interest from your income. 

Do I need experience?

It helps but not always a requirement, we have lenders for those starting out to full time investors, developers and landlords. Having experience of a similar size and cost will give you a greater lender choice on larger projects.

What can catch me out?

All brokers and lenders do not share our morals and quite often you will see a very attractive interest rate to hook you in and then further on in the process the rate increases and it’s too late to go anywhere else.

There are also lenders who offer lower rates for the first 3-6 months of the loan but  increase them considerably after that.

It can be quite difficult to buy a property, do a refurbishment and remortgage within this period. Often a longer term with a higher rate at the beginning is better value for you.

Watch out for the method of valuation. It should ideally be Open Market Value (OMV) which does not impose a time restriction on the sale. Some lenders work off 180 day or even 90 day which usually is much lower than the OMV.

Finally what’s the reputation of the broker and the lender like? Some of the smaller lenders may not have the money to complete on the loan.

If your broker is not FCA regulated  they won’t have direct access to all of the more established lower-priced lenders.

You can check the regulation by looking at the bottom of their emails or website and either they or the firm should be on the FCA Register.

How important is the solicitor?

You may have the quickest broker and the best lender in the market but if you don’t have a good solicitor the process may be extremely stressful and can even result in missing the auction deadline.

It’s essential your solicitor has experience of bridging finance and dealing with a lender’s solicitor as not many do.

We have a list of solicitors that understand the bridging market and some lenders  will also allow their solicitor to act for you.

Is there a charge if I repay early?

Hopefully No but it’s dependent on the lender and how aware your broker is of the market. All lenders have a minimum term which is usually one or three months, although we have seen a minority at six. No matter how early you repay the loan you will always pay the minimum term.

However some lenders, although we don’t deal with these, will take interest for the duration of the loan even if it is repaid early. Not very nice.

For example you take out a nine-month loan and repay after three, the lender will still take nine months interest.

How will it get repaid?

The two most common methods are sale of the property or a remortgage. Before you go into bridging finance always ensure  you have a Plan A, Plan B and preferably a Plan C.

If it is a remortgage you need to protect your credit file as if it was a loved relative as a deterioration may affect the number of lenders who will repay the bridge.

How much does it cost?

Typically there is a lender set-up fee of 2% and interest is charged per month based on the loan to value (LTV).

Rates vary based on the amount you require, it’s LTV, the property, your experience and credit file. Please contact us if you have a particular project in mind.

In addition there is a valuation fee, your solicitors and most of the time the lender’s solicitor. Occasionally there is an exit fee based on a number of months interest, although this is rare.

If you are carrying out a refurbishment the lender may carry out a mid term inspection and you are responsible for the fee.

How much can I get ?

There is no one answer for everybody. It depends on your personal situation, the property and your plans for it. A minimum value of £75,000-£100,000 is required by many lenders and you can get up to 75% of the value of the property.

If you can provide additional property as security 100% is possible.

Can you get bridging finance for a heavy refurbishment?

Yes you can. Typically heavy refurbishment covers structural or work that requires planning permission e.g. extensions and loft conversions. It can include commercial to residential conversions or a conversion into an HMO.

Experience is preferred of one similar project of size and cost over the last five years but if it’s your first time, there are still lenders for you.

Can you get bridging finance for a light refurbishment?

Yes you can. Typically a light refurbishment is improving a property and there is no structural work. It usually includes a replacement kitchen, bathroom, decoration, flooring, resolving damp issues, rewiring, heating, replacement doors and windows.

How important is the solicitor?

You may have the quickest broker and the best lender in the market but if you don’t have a good solicitor the process may be extremely stressful and can even result in missing the auction deadline.

It’s essential your solicitor has experience of bridging finance and dealing with a lender’s solicitor as not many do.

We have a list of solicitors that understand the bridging market and some lenders  will also allow their solicitor to act for you.

How will it get repaid?

If you only remember one point from this page this should be it. Getting into bridging is a lot more straightforward than getting out. If you are looking to sell to repay the loan you need a plan B, which is usually a remortgage of the property.

When we receive an enquiry we spend our time initially on it’s repayment which gives the lender and more importantly you, the confidence that all your options have been considered.

The last thing anybody wants is sleepless nights worrying how a loan is going to get repaid.

Unfortunately we have seen numerous examples where the focus has purely been the bridging loan and the exit hasn’t been considered.

What can catch me out?

All brokers and lenders do not share our morals and quite often you will see a very attractive interest rate to hook you in and then further on in the process the rate increases and it’s too late to go anywhere else.

There are also lenders who offer lower rates for the first 3-6 months of the loan but  increase them considerably after that.

It can be quite difficult to buy a property, do a refurbishment and remortgage within this period. Often a longer term with a higher rate at the beginning is better value for you.

Watch out for the method of valuation. It should ideally be Open Market Value (OMV) which does not impose a time restriction on the sale. Some lenders work off 180 day or even 90 day which usually is much lower than the OMV.

Finally what’s the reputation of the broker and the lender like? Some of the smaller lenders may not have the money to complete on the loan.

If your broker is not FCA regulated  they won’t have direct access to all of the more established lower-priced lenders.

You can check the regulation by looking at the bottom of their emails or website and either they or the firm should be on the FCA Register.

How much does it cost?

It’s dependent on you, the property, your intentions and the amount of the loan. Buying a property to do a light refurbishment will have a lower rate than a basement or loft extension.

As well as the setup fee which typically is 2% there will be a monthly interest rate, valuation fee and usually two sets of solicitors. Normally you would appoint your own and pay for the lenders. There are some lenders who allow you to use theirs which reduces costs and speeds the process up.

If there is heavy refurbishment and you are borrowing against the future value of the property there may be additional monitoring costs as well.

There will also be our broker fee for the work involved in arranging the finance and dealing with all parties to ensure that it completes on time.

We are very transparent and will provide details of the rate and fees before you enter into any commitment.

What is the maximum term of the loan?

We usually arrange a term of between nine and 12 months. That gives you sufficient time to complete the project and either sell or remortgage. If it’s a longer project we have lenders that go up to 24 months.

Can I get pre-approved?

Yes you can. Please send a link to the auction house, lot number, your bid price, details of the project and your experience along with costs, timescale and end value.

We will approach lenders on your behalf to obtain competitive funding so you have the comfort of having the finance in place before bidding commences.

What kind of properties can you finance?

As well as traditional housing we have lenders who are used to financing commercial units as well as semi – commercial ,where you have residential upstairs.

Do I need a valuation?

There are some lenders who don’t require valuations and this is a major selling point, however in our experience it is recommended. If you don’t get one, when it comes to sell or remortgage and the valuer identifies a problem that hasn’t been rectified you may not be able to repay your bridging loan on time. It’s far better to know any issues before you do any work as it will be more cost-effective for you.

How much can I get?

Up to 75% loan to value (LTV) of the lower of purchase price or valuation on residential with most lenders and with some based on the valuation. As well as finding money for the deposit, in most cases you will have to pay the lenders interest and fees upfront. With commercial property the LTV is 65% – 75%.

What is Auction Finance?

A form of short-term finance also known as bridging finance. It’s used to finance properties purchased at auction as you usually have 28 days to complete. Long-term lenders are usually not quick enough to deliver within this timescale.

What to do if you have a complaint?

If you wish to register a complaint, please contact us: in writing at Searchlight Finance Ltd, 98 King Street, Knutsford, Cheshire, WA16 6HQ or by phone on 01565 654005 or email feedback@searchlightfinance.co.uk

If you cannot settle your complaint with us, you will not be entitled to refer it to The Financial Ombudsman Service. Investment Buy-to-Let Finances, Unregulated Bridging Finance and Development Finance are not regulated by the Financial Conduct Authority so you will have no recourse under the Financial Services Compensation Scheme.

Refund of fees

Our fee is non-refundable, should your application be discontinued for any other reason including but not limited to circumstances where:

  • we are unable to secure a formal finance offer as a result of inaccurate information provided by you about your personal circumstances, the proposed property details, materially inaccurate information which we have relied or your non-disclosure or non-provision of relevant information as required by the lender.
  • we can secure a suitable finance offer for any mortgage which would reasonably enable your transaction to proceed.
  • you choose to withdraw from the property transaction or terminate the mortgage application process.
  • the vendor withdraws from the transaction.

At our discretion we may transfer part or all the fee to a future application with us.

What will you pay for this service?

£500 is payable on application (see refund policy)

Buy to Let – If additional work is required further fees may be payable. This includes business plans, more than two applicants, change of property or a complex application. You will always be notified in advance if an additional fee is needed.

Commercial Property and Bridging Finance up to 1% of the loan amount payable on offer but may be deferred to Completion. You will always be notified in advance what fee is payable.

We will be paid a procuration fee from the lender. You will receive an illustration which will tell you about any fees relating to the finance.

We may reduce our fees depending on the loan amount, the volume of business you give us and as a thank you for your referrals.

Tax Advice

We do not give tax advice. By placing an application with us we expect you to have carried out your own research and taken professional advice from an independent tax adviser. By accepting our conditions, you confirm we have not provided any type of tax advice to you.

Whose products do we offer?

We offer a comprehensive range of secured property finance from across the market, but not finance that you can only obtain by going directly to the lender.

Who are we?

Searchlight Finance Ltd is authorised and regulated by the FCA (Financial Conduct Authority), registration number 743220. You can check this on the FCA’s website fca.org.uk/register or by contacting the FCA on 0800 111 6768.

This document relates solely to Investment Buy-to-Let Finance, Unregulated Bridging Finance and Development Finance that are not regulated by the Financial Conduct Authority (“FCA”). Use this information to decide if this service is right for you.

What’s the difference between monthly and daily interest?

It can be a lot. Daily interest is preferable when the lender calculates interest surprisingly on a daily basis. For monthly interest if the loan was taken out on 1st August ,the first month’s interest finishes on 31 August.

If the loan is repaid on 1st September you would pay an extra month’s interest even though it is only for one extra day.

Searchlight Finance Limited is registered in England and Wales No.07929050 Searchlight Finance Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (http://www.fca.org.uk/register) under reference 743220. The FCA do not regulate Business Buy to Let Mortgages or most Commercial Mortgages and Bridging Finance. ICO Number Z3109319. Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.