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Posts Tagged 'Bridging'

Refurbishment Lending for Costs

Criteria

  • Initial Loan 70% of the value
  • Refurbishment costs 100%
  • Gross facility up to 70% of end sales value
  • Loan size £250,000- £1.5m
  • Term – up to 18 months
  • Minimum value £300,000
  • Works must be lower of 50% of current value or £500,000
  • Experience essential

Suitable for

  • Extensions
  • Conversions
  • Planning
  • Permitted development
  • Heavy refurbishment
  • Structural works

Light Refurbishment Finance

Has your BTL mortgage been refused due to the condition of the property?

Improve the value and the rent on a tired property. Whether it be a new kitchen, bathroom, damp, electrics we have lenders for all of them at competitive rates up to 85% LTV with experience and 75% without.

Contact us for refurbishment finance options.

When can bridging finance be used?


Standard bridging is ideal for customers looking to secure the purchase or refinance of a residential or investment property
including:

Chain break – whilst waiting for an additional property sale
Raising funds for short term requirements
Auction purchase
Capital raising for any legal purpose
Meeting tight transaction deadlines

Light refurbishment:

Light refurbishment is used where short term finance is needed for items such as:

  • Modernising properties
  • Replacing kitchens and bathrooms
  • Properties deemed uninhabitable/unletable by long term lenders

Heavy refurbishment:

Heavy refurbishment is where you may require short term finance for works that require building regulations or planning permission.This could help with:

  • Conversion and reconfiguration of residential property
  • Commercial to residential
  • Completing a development that is wind and water tight
  • Extension, loft conversion and basement digs

Bridging Loans

What can Bridging Loans be used for?

Bridging loans are used for a number of reasons. These range from conventional bridging, where a homeowner wishes to purchase a new home but hasn’t sold their current property, to auction finance, refurbishment and conversion.

What Can Go Wrong?

It’s a short time loan and not suitable for long-term finance. Make sure the term of the loan gives you enough time to repay it and don’t get fooled by lower rates for shorter-term loans.

Where’s the Exit?

You need to understand how the bridging loan will get repaid before you take it out. The more exit routes the better. You may lose the property if you don’t repay on time.

When can lenders repossess?

Read the loan agreement and get legal advice. Reasons include not paying the interest, repaying on the due date, or you breach a condition such as carrying out an unauthorised conversion.

We have arranged loans recently for:

• Conversion of office into a flat under permitted development
• Conversion of a mid terrace into 4 flats
• Conversion of 2 flats back into one house
• Refurbishment of a property with no kitchen or bathroom
• Loft and side extension to convert into a student HMO

Auction Finance at 75%

Yes 75%. Valuation instructed same day and a fast track legal process to reduce the stress. All the lender asks is that you have at least two rental properties.

Contact us now to get your purchase agreed.

 

Bridging Finance – How strong is your exit route?

Do all lenders care about the exit?

Not wanting to be too controversial but various cases have led me to the conclusion that not all lenders look in detail on how they are going to get repaid. I must stress it is some and not all.

Being the rare breed that I am of broker, landlord and experience of running a bridging company, the exit does concern me. Now three cases were all presented by other brokers to lenders with repayment coming from a remortgage. All had major holes in that strategy and the risks were never explained to the client by either the broker or the lender.

1. A six-month loan at a low rate when the client needs nine months. To extend costs far more than a nine-month term with another lender.

2. A remortgage to a limited company whose main director/shareholder had adverse credit as long as your arm but the broker put the exit down as a remortgage and the lender never checked.

3. A valuer saying there was asbestos in the property but no specialist report being requested.

4. A recent case has got me thinking about how little due diligence is done by some lenders on the exit. We have another broker introducing Steve to a bridging lender to convert a guest house into an HMO. The deal gets done, refurbishment goes to plan and after several weeks of the client not getting the exit I get the call to sort out the repayment. Steve meets the criteria of the HMO lenders.

I ask him about planning and he tells me it has established use. I say prove it as that’s what the lender will need. He then comes back to me and says it doesn’t have planning and has to apply for it. So he has spent his money on a property that has planning for a guest house. Now he admits he missed it but this was never discussed by the lender or the broker. Surely their solicitors knew as well?

What does that mean to the bridging lender? Well the cynic in me says another two-three months of receiving interest and the bigger cynic the possibility of default interest. Now I hope I am wrong but I can’t see any reason why the lender did not identify this and bring it to the client’s attention.

Now that’s four cases where their broker gave them a product that was never going to work. Clients weren’t aware of it and it has cost them all financially, never mind the stress and anxiety.

At Searchlight, we work on the exit first and if it can’t be provided by multiple lenders we won’t do the bridge.

Contact us now to see how we can help you as we don’t expect this product to be around for long

 

Bridging Finance-How does it get repaid?

I’m surprised at how many enquiries I get from clients who taken out bridging finance through another broker who has not got a firm exit in place.

If you don’t have the funds to repay it there are only two ways it can be repaid, either the sale of the property or a remortgage.

With the remortgage, before you take out the bridge you need to ensure that both you and the property meet as many lenders criteria as possible. If you have only one lender to choose from, then in 6 months they not be lending in that market or at that LTV. That’s dangerous and can cause you a lot of problems.

If you are late repaying the loan most lenders increase the monthly interest rate which will quickly wipe out any equity you have in the property.

So focus on the exit before you take the bridge.

 

Bridging Finance – The importance of the exit.

When going into bridging always work backwards. How will it get repaid?  If you only have one or two lenders then be very careful as those lenders may change their criteria and you may not be able to remortgage to repay the bridging loan. The implications if you are not able to refinance, are higher rates and possibly repossession.

The longer the period between getting the bridge and it’s repayment the greater the risk. Any experienced broker should be able to tell you what options you have before you take out the bridging loan.

Auction Finance in Leeds

We were approached by a residential mortgage broker who had a client that had purchased a residential investment property at auction. They thought they would be able to obtain finance from their bank but their request was declined.

Due to the tight deadline bridging finance was considered but we were confident that we could raise long term finance within the time limit. The loan application was received and due to our strong relationship with Shawbrook we rang them to ask them to put it to the top of their workload. This was done and we obtained agreement. As a partner of Shawbrook we are able to instruct valuations so the valuer was then instructed and visited the property the next day with the valuation report being received the day after.

A formal offer was then issued and it was down to solicitors to finish the hard work that all parties had put in. As we are copied in on all solicitors correspondence issues were identified early and dealt with quickly.

The deadline was achieved and the clients now have a new addition to their property portfolio.

Bridging Finance for Auction Purchase

We were approached by an IFA who had tried to obtain bridging finance of £350,000 on a property bought at auction. The client and IFA had approached lenders direct and the IFA had gone to a specialist bridging firm who couldn’t help.

A 10% deposit had been paid at auction and we had less than two weeks to obtain the finance. The buyer was very anxious about losing the deposit and being sued by the seller.

The property was almost derelict and was putting the lenders off. We found out early on that the family were wealthy and had other assets including a profitable hotel which was available as security.

We approached several of our lenders and we met with the owner of the bridging company chosen and gave a presentation to them which explained the transaction in detail and outlined all the risks.  Due to this they didn’t want a valuation and the money was released the day before the deadline.

We negotiated the ability for the business to reduce the debt during the period of the loan to lower interest costs and the house is now being restored and will be back to its former grandeur in the Derbyshire countryside.

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.