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When All Others Are Confused…

When all others are confused…

By Brian Rubins, Executive Chairman

Brian Rubins
The business community can be forgiven for being confused, having doubts and finding it hard to make decisions when simultaneously facing COVID-19 and BREXIT. But, as the saying goes, “when the going gets tough, the tough get going”.

This is the time to fight back; introduce new ideas, improve systems, widen your offering. While others are confused, grab the moment. And bridging, as it develops into a mainstream product is such an opportunity. No longer just a means of funding the purchase of a new home until the existing property is sold, bridging has widened its reach to include residential investments and commercial property for both the property industry and business community.

Products now include residential development finance for property developers. Yes, development finance is more complicated and there are skills to learn with the need to address phasing, construction procurement, saleability and even planning, but with support from an experienced lender, all of this can be achieved.

More recently, residential development finance has extended to include owner-occupiers who wish to build their own “dream palace”. Often the security is both a first mortgage on the house being built and a first or second charge on that which is to be sold. Only lenders who are regulated by the FCA can offer these loans as the new property will be owner occupied and the home being sold has been owner-occupied. Accordingly, there are a small number of lenders but there is growing demand.

Bridging brokers and lenders are infamous for offering “flexibility”, “simplicity” and “completion within 48 hours”; sadly, in the real world much of this is not true. Bridging loans, particularly regulated loans, are not flexible, the very reason being their rigid structure.

But flexibility can be offered by carefully structuring the loan. For example, with the High Street banks being reticent to lend, ALTERNATIVE Bridging is now offering their form of overdraft, where a limit is agreed against suitable security, and the borrower can draw down, repay and drawdown again – as often as necessary. This not only provides flexibility and a funds on tap whenever needed, it avoids repetitive setting up costs and interest is only paid on the balance being used.

Although the lender’s solicitor can issue a standard form of legal charge and loan agreement within hours, with the best will in the world, it usually takes more than a few days for the valuation to be carried out and for the borrower’s solicitor to complete the legal due diligence. Sometimes the impossible is achieved but that is often because all the information is available, the loan having been declined by another lender at the 24th hour!

The pandemic and BREXIT before it, has caused many lenders to be less able to complete loans than before. Accordingly, be sure that the lender says what they can and will do and then does it. This is a great time for innovation but spiced with reality and caution. As always, certainty of completion is paramount.

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Click here to read the article in the October Issue of Mortgage Introducer

Click here to learn more about Development Finance