overlooked this part of our criteria to make the deal happen.
communIcatIon Is key Importantly, the old school approach to lending is based on a close relationship and good communication between the lender and broker. For example, at Drawbridge, brokers are given an early indication of our appetite for a deal and, if required, can also discuss all cases with our head of credit. It’s about establishing an ongoing conversation - as opposed to hearing nothing for a number of days then to be turned down out of the blue with vital time lost. In days gone by, high service levels like this were seen as essential by lenders. Brokers and their clients were treated well and were dealt with quickly. These days, by contrast, it can take four to five working days, if not more, for many high street lenders take to respond to an enquiry. The key difference is that whereas lenders and brokers used to work together, today it feels like they work at odds with one another. If more lenders looked more to the past and drew on the basic tenets of traditional lending practices then the future of brokers and their clients would be a lot brighter. n
EXAMPLES OF OLD SCHOOL LENDING
We made a £265,000 second charge extended bridge loan for a 3-year term. On this occasion, a recently divorced client wanted to start her own business in interior design but was refused by various high street lenders for a business loan as she failed to meet their credit score due to insufficient income and not having enough revolving credit. The only asset she had was her residential property, which was given to her as part of the divorce settlement and valued at circa £3m. She had a small outstanding mortgage of £180k on the property. Drawbridge lent her the money to start her business venture and rolled up three years of payments so that she wasn’t under any pressure
to make any monthly payments while the business got on its feet. Through an extended bridge, the client has been given the chance to get her business to a stage where she has at least two years’ trading history, at which point she will be able to refinance to a traditional lender.
We lent £1.2m to a first-time buyer who was purchasing a buy-to-let property in Kensington. The client was not able to use a traditional lender, as most banks stipulate that you must have owned a residential property for a period of time before they will consider lending to you for investment purposes. The other big issue that banks have is the loan size for buy- to-let properties, with many capping out at £1m. Our client lived in the family home, which was owned by his
parents, and struggled to get finance at this level. We were comfortable with this transaction as we could see where the money for the purchase was coming from. Also, the rental income for the property was very high as it was in a prime location in central London.
We have completed on various deals recently where the rental income on properties hasn’t been enough to make them fit on our standard rental calculations. However, the way we have structured these deals has been to either hold back the shortfall in the rent for the term of the loan, which we will pay on a monthly basis, or reduce the interest rate to a low enough level so the rent does in fact fit (in cases like this, we roll up a set amount per annum to the end of the term).
mortGaGe introducer AUGUST 2010 35
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