Bridging and Short Term Property finance should never be treated, used or confused alongside long term mortgage lending. It’s a “project” financing product that can not be underwritten or processed anything like that of a long term mortgage. It’s a product with unique dynamics and risk profiles, where the loan is materially underpinned by an experienced assessment as to the borrowers’ ability to redeem the loan through a property sale or remortgage.
So what makes a good bridging lender? Certainly not cost alone or the level of loan to value that could be advanced. Yet many lenders in this sector believe this to be the case; marketing the product in a similar manner to that of long term mortgage lending and completely missing the point!
What is the point? The point is that good responsible bridging lending requires lenders to demonstrate an ability to underwrite in detail all the relevant circumstances of a case, their staff must have both property and property finance experience, be able to asses risk and structure a deal accordingly. Each and every case can only be individually underwritten and priced by experienced staff, capable of working with the broker/introducer and applicant, to ensure that the deal works and is right for the borrower.
At Bridgebank Capital we pride ourselves on providing a highly accessible and personalised service, supporting all loan applications with the highest level of relevant experience and ability. We know its not just about cost and Loan to Value, but more importantly the ability to structure the right deal for the borrower and deliver that deal exactly as required, with a level of personalised service support that we believe is one of the strongest in the sector.
To illustrate the types of loans we have written recently:
• Debt Forgiveness Deal – our client owed £700k on a £900k residential investment portfolio in the West Midlands. His current lender wanted out of the deal and was prepared to accept £550k, which we advanced on a 3 month term.
• Auction Pre-Approval – The problem with auction deals is that the properties tend to value at the purchase price, even when clearly being bought below value. In this case we valued the property pre auction so we could lend off the ‘true’ OMV, enabling the client to buy with minimal deposit.
• Revolving Credit Facility – The client owned £600k of unencumbered properties. We put a facility in place of up to £390k, enabling him to draw down tranches of funds as and when required. With valuations and legals already done, he was effectively a cash buyer and could buy new stock at attractive discounts.
• Residential Investment Refurbishment Deal – In this case the property was in need of modernisation. Our client was a builder who paid fair value for the property, but after spending just £5k on the works, was able to add over £20k to the capital value.
We work closely with our introducers who trust and utilise our experience and willingness to deliver a quality service and the right deal for their clients. With the continuing reluctance or inability of Institutional lenders to finance the front end speculative or higher risk part of a property transaction, bridging lending has become more important and needy in order to ensure projects actually take place at all. It’s a product that takes on the front end risk, and hence the pricing, to facilitate either a sale or remortgage. In the case of long term remortgage, then the institutional lenders will take out and redeem the bridging loan as soon as that asset is income yielding and can demonstrate an ability to service the monthly debt service costs. It is therefore precisely that level of risk and the short term nature of the bridging loan that dictates the necessity for detailed experienced underwriting and the corresponding finance cost.
Speak to the Business Development Team at Bridgebank Capital on 0808 222 22 11 – we have the know-how!