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only require a light refurbishment (as opposed to
Broker Questions
structural work) involving a new kitchen and or
bathroom and redecoration. Once the work has
I have a client who is thinking of buying
Cheval is a responsible lender and we will
been completed the borrower repays the bridging
property at auction. However, as lenders
only lend where the take out is sensible and
loan by either selling or remortgaging the
seem to be taking longer and longer to sort
realistic. Each case and the customer’s
property.
out their mortgages, she may be interested
circumstances are assessed individually. If we
Historically and today, bridging finance has
in getting her initial finance through
felt that it was realistic for the customer to be
been used to assist with auction purchases with
bridging. Do you have a minimum length of
able to sell her property before the expiry of
very restricted timescales.
time people can bridge for without being
the bridging loan and that she was committed
These are just a few examples of the uses of
penalised and what sort of interest would be
to selling within that timeframe and
bridging finance.
charged on a short-term, say three month,
understood the risks of not doing so, then
Why should brokers be
loan?
subject to LTV, we would indeed recommend
a bridging loan.
interested in bridging?
Borrowers may repay their Cheval loan at
Bridging finance allows brokers to assist clients in
any time. All we require is that if the loan is
I have a client who needs to complete by
situations where mainstream finance is either not
redeemed within the first month, then a
the end of the week otherwise he will lose an
available or cannot be provided within the
minimum of the first month’s interest is
awful lot of money. How quickly can you get
required timescales. In addition, where the
payable. After the first month, interest is
a bridging loan?
broker is arranging a refinance of the bridging
calculated on a daily basis. There are no
loan, they have the opportunity to earn two sets
redemption penalties or exit fees. For a first
Cheval has completed loans within 24
of legitimate commission and fees – one from the
charge loan, Cheval charges interest at 1.3%
hours and regularly completes loans within a
bridging lender and one from the refinance lender.
per month, so a three month loan would
few days of an application being received.
How can brokers get into
work out at 3.9% in respect of interest.
Where all parties concerned, including
surveyors and solicitors pull together, then
offering bridging loans?
We have received an enquiry where a
loans can be completed within timeframes
Brokers simply have to be aware of what bridging
client has an option to purchase an old
that are nothing short of astonishing.
finance can and cannot do for their clients.
Victorian property which has full planning
Armed with this appreciation they will then be
permission for it to be converted into four
I’ve not recommended bridging loans
aware when a solution to their client’s
separate flats. However, he is asset rich and
before so could you tell me the most
requirements might lie in a bridging loan. After
cash poor and doesn’t have the cash
important things I can or need to do to help
that, it is simply a question of picking up the
available to buy it and then renovate it.
my client get a bridging loan?
phone and discussing the scenario with Cheval to
Could he get a bridging loan for this
see whether the matter can be taken further.
property?
In order to asses whether a loan
Depending on the facts, the bridging loan may application will fall within Cheval’s lending
be a regulated mortgage contract or governed by
Cheval does not lend against properties
criteria, you need a realistic assessment of the
the Consumer Credit Act, in which case the
that require structural works. However, with a
value of the security property before the
broker must of course have the appropriate
client that is asset rich there is the possibility
customer commits to the expense of a formal
permissions and licences. However, in our
to release equity from other properties that
valuation. The reason for requiring the
experience, most bridging loans are unregulated.
could be used to purchase the property and
bridging finance must be compelling; in other
Are all bridging products the
help fund the conversion.
words, the reason for the bridging finance
must make sense. Lastly the method of
same?
A client is about to exchange on one
repaying the bridging finance must be
Fundamentally all bridging loans have the same
property whilst selling another.
realistic and plausible – if it is to be by way of
purpose of providing short term finance.
Unfortunately her chain has been delayed
refinance, both you and Cheval must be able
However, the principles mask significant
but the people she is buying from are
to show for regulatory purposes that we have
differences between providers and their criteria.
putting pressure on her to move ASAP
considered whether the customer is likely to
Cheval passionately believes that there should be
otherwise they are talking of just taking it
be able to afford and obtain a remortgage.
no impediments to borrowers being able to
off the market. Would it be safe to
Best results are always achieved where Cheval
redeem their loans. That is why we do not charge
recommend a bridging loan to her?
and the broker work together.
exit fees, redemption penalties or have a
significant minimum loan term. We simply
require that a minimum of the first month’s Who is Cheval?
interest is payable. Not all short term lenders Cheval is a principal lender that was established in 1996. It has often been in the forefront
offer these terms. Further, we do not charge up of innovation in the bridging finance sector. We were one of the first lenders to be
front fees as standard. In fact, we advise brokers authorised by the FSA and to offer brokers the ability to create KFI’s online. We have
to be cautious whenever their clients are required persistently pushed for higher standards and self regulation in and of the sector. We were
to pay any upfront fees. The only upfront cost active in the establishment of the Association of Short Term Lenders (ASTL) in 2008 and
that should normally ever be paid is a valuation currently are an Executive Member. Cheval Property Finance PLC is privately owned and has
fee. a number of subsidiaries. Cheval specialises in providing bridging finance.
Lastly, not all lenders will enter into a second We concentrate on providing the best possible service to our brokers and customers. We
charge loan and there are significantly varied seek to learn if we fail to meet our own high
appetites when it comes to lending against land standards and believe that an open and honest
(with or without planning permission), dialogue with our brokers and borrowers is the best
developments, new builds and commercial/semi approach – even if it means giving disappointing
commercial property. news.
www.mortgageintroducer.com October 2009 Mortgage Introducer
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