More Than Just A Bridging Loan
By Brian Rubins, Executive Chairman
How would you use bridging finance for your clients? Perhaps as a short-term fix to complete an urgent purchase, or finance for a housing development? It could be used as an alternative to an overdraft, or to finance a refurbishment? It could even be used as a term loan. And, of course it could be residential or commercial, regulated or not – a first or a second charge. There are a variety of answers and each offers a different opportunity.
It is a multi-faceted product and, in fact, “bridging finance” is now a euphemism for an alternative source of property finance for owner-occupiers, the property industry and the business community. It is a diverse source of finance for an equally varied group of borrowers.
Bridging has applications for financing property purchases, funding residential development, providing working capital and repaying expired loans. It can also be used for improving existing assets and auction purchases.
For introducers, these different funding choices, that are sometimes all available under one roof, present great opportunity to meet the diverse needs of their clients. On the ball lenders and savvy brokers recognise that sometimes bridging can present an alternative solution which could turn a “no” to turn to a “yes”.
For example, when the income on a property has not been stabilised and an exit by refinance is a year or two away, then a term loan for 3-5 years is the answer. This is not something readily associated with bridging, but it can prove an invaluable option. Similarly, a lender with a listening ear that provides decisions by people, not algorithms, can provide businesses which are on a recovery path with a term loan and the time needed to implement their plan to re-establish profitability.
Where a property needs improvement before being refinanced in the mainstream, a refurbishment loan can be the answer. Equally, acquiring and refurbishing a buy to let property with a refurbishment bridge, enables value to be added and the repatriation of capital for another project when the property is refinanced.
Development finance is the odd ball in the “bridging” family of products. Its success depends on in-depth investigation as there are many moving parts, such as land value, construction cost, sales value and separately, sales demand. Because of this, more questions will be asked and the closing period extended. This is just a fact of life. But remember, the more experienced the lender, the shorter period and the more certain the outcome.
Lenders with the ability to offer the choice of all these products provide their introducers with a world of opportunity. Not only at outset, providing an alternative solution when the facts prove not be what is expected, but also during the life of the loan and on expiry. How helpful it is when a lender can extend a bridging loan or transfer to a term loan or even fund unexpected repair costs, and all under one roof.
So, introducers, please listen here – a bridging loan is not a just bridging loan, but an alternative source of finance that provides an invaluable tool for you and your clients. Learn what your lenders have to offer, work closely with them, and turn every opportunity into a loan.
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Click here to read the article in the January Issue of Mortgage Introducer
Click here to learn more about our Bridging Products.