MIp29_1109.qxd 21/10/09 16:46 Page 3
Commercial Finance Introducer
29
Bridging Q&A
All you’ve ever wanted to know about bridging
finance, courtesy of Mayfair Bridging’s Shoaib Bux
1. What is bridging finance? thus I think the LTVs for commercial 6. Many bridging lenders are a
Bridging finance is simply short term bridging finance will still be low until the target for mortgage fraud. Is
finance. It is usually required until market improves. Again the HMO market is this true?
traditional forms of financing are in place difficult as many of the high street lenders Yes most certainly. Brokers need to be
or where funds are required quickly to have either reduced their LTVs considerably aware of the current scams and frauds
secure a property transaction. It has many or pulled out of this sector completely. being pulled off by organised criminals.
other uses like property renovations, chain Bridging lenders usually have their LTVs Again a common sense approach needs to
breaking, auction purchases, below market lower than the traditional lenders. be taken as many criminals now change the
value purchase, cash-flow assistance, land registry details by identity fraud. They
overseas property acquisitions, meeting tax 4. What’s your view on Link then ultimately try to obtain a mortgage on
liabilities, business acquisitions etc. lending going into the property without the real owner
administration? knowing what’s happening. This usually
2. Is bridging finance easy to It is very sad to see a major bridging lender occurs in very low LTV deals where the
arrange? like Link Lending going into prospective borrower has only owned the
Yes. The majority of times you can ring up administration. We are here to help brokers property for a couple of months. For
a short term lender or simply fill out an with any bridging enquiries they may have. example if the prospective borrower
enquiry form online. As many high street currently lives in a terraced house but owns
lenders are declining applications or simply 5. How do you view a below an unencumbered Mayfair property which
taking a lot longer to make a decision, more market value purchase? was bought only a few months back then
brokers are turning to bridging finance to There are many instances where investors alarm bells should be ringing. Criminals
secure a property or drawdown on funds are picking up property as substantial target bridging finance lenders due to their
quickly. discounts to their true value from distressed speed.
sellers. During the glory days when some
3. Many bridging lenders have mortgage lenders allowed same day 7. What’s the usual term for a
reduced their LTVs. Why is remortgages, lending 100% of the purchase bridge?
this? price was very common. We now want to In the past our average terms for a bridge
There are two main factors contributing to see some level of commitment from the were three or four months. As many of
this, the fall in the capital value of property client. It is very common for borrower to the traditional mortgage lenders require
and the considerable reduction of exit just walk away from a property if it goes the borrower to have owned the property
routes for the bridge. The last couple of sour especially if they haven’t really put any for at least six months, our average term
months we have seen house prices increase of their own money in. Therefore we ask for for a bridge has increased to seven
which is great news for lenders as it brings a 15% cash contribution towards the months.
confidence in the market, but we are still purchase price.
seeing exit routes becoming harder to come But brokers should be wary of very deep 8. What do you think about the
by as traditional lenders become have discounts as there could be some element of future of the bridging sector?
become picky. Cases where a high street fraud taking place. A common sense The bridging finance sector will continue to
lender has agreed an agreement in principle approach needs to be taken. You need to ask grow as brokers gain more knowledge and
to lend and then change their mind at the why the vendor is selling at such a deep learn how easy it is to arrange a bridging
very last minute is all too common. discount. Will the vendor not get more if loan. Currently there has been exponential
We have found that commercial just he sticks into an auction? These level of enquiries as traditional forms of
mortgages are still very difficult to arrange questions need to be raised with the client. finance have diminished.
www.mortgageintroducer.com November 2009 Mortgage Introducer
Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44