Bridging Finance
Bridging finance is usually seen as a quick solution to issues that may crop up with the clients mortgage application close to completion. It can make the difference in allowing a purchaser to move very quickly. Bridging is not just about lending of last resort, there are many situations in which a bridge, despite the cost, can be seen as best advice.
Non-status
The most frequent use of bridging finance is when the client is looking to complete on a purchase but has issues with selling their own property. Bridging finance is often non-status, so there are no affordability problems with running two mortgages at once. If your client has lost their buyer and still needs to move quickly, then bridging could be an option for them. Non-status also means adverse credit is accepted. Clients with arrears can look to bridge a remortgage to clean up their credit file for 6 months in order to get a better deal long term.
Any legal purpose finance
Entrepreneurs are often asset rich but cash poor, so if they are looking at investing in a project that their bank would perceive as too risky, then a bridging loan may be a viable option. Bridging loans are for any legal purpose, and are over a short time period. If your client spots an unusual opportunity then a bridge may be the quickest and easiest way forward.
Speed
With lenders being increasingly careful about what property they lend on, timescales can often come into play. If, for example, the property is being purchased at auction and there is not enough time to complete on the high street, a bridge may be the best option. A bridging loan often completes in just five days, with a motivated borrower and solicitor. With an acceptable valuation already carried out this can be even quicker.
Suitable security
It may be that there is an issue with the property that may mean a lender will take a full retention of the mortgage advance. Even if the property is not suitable for mortgage lending, with no kitchen or bathroom for example, the property can still be purchased on a bridge and rolled onto a residential mortgage when the clients have completed works. If the property is chargeable, and in the United Kingdom, a Bridger will look at the deal and try and make it fit, regardless of the condition of the property. It is also worth bearing in mind that a bridge can be a first or second charge.
Purchases at Undervalue
Until recently it was possible to purchase properties undervalue and flip them onto buy to let products. With concerns in the buy to let marketplace over the true value of discounted properties, this is not currently available. However, if there is a genuine reason for a discounted purchase price then some lenders will still entertain purchases based on full market value, not the purchase price, minimising the clients need to put their own funds into the deal.
Useful information to gather from the client for bridging deals
- Ask for the property particulars if buying.
- Is there an existing valuation available?
- Ask for 12 months mortgage history if refinancing.
- Does the client have any adverse history? What, when and why?
- Always be clear on how the bridge will be redeemed, Bridgers will be more comfortable when there is clear evidence of exit.
- Is there additional security available? Bridgers will take second or sometimes third charges to make a deal work.
Commissions and fees
We do not charge an up front processing fee on Bridging Finance. The lender will pay a procuration fee, and we will charge a minimum of 0.25%, or £250.00 whichever is the greater, on every deal. The client fees are set in negotiation with you as the acting broker, and each of these will be split 50/50 and paid to you within 24 hours of receipt of cleared funds from the lender.
As brokers ourselves we know the importance of going the extra mile for your client. Often, your relationship with your clients is strengthened when you can quickly find a solution to a problem. This can also lead to more repeat business and referrals. Remember, if you don’t bridge the deal, someone else will, and with Knock Knock Solutions, bridging can be done on a refer and forget basis, with all fees still split 50/50.