bridging deals will help clients build a better bridge and do the right thing by your client


they use either of these as the basis for the loan, but it would usually be in their literature or on their website, and if not it’s worth making a phone call to check before the client pays out for the valuation if loan to value is already quite high in terms of the lenders maximum threshold. if you use a specialist broker/


packager they will take this into consideration for you when placing a case, but it’s important to bear in mind before speaking with your client to avoid problems arising at a later stage in the application process.


Another consideration is to whether a lender will lend against the property value even if the purchase price is lower for some reason. Although it’s a common scenario that we see, not all lenders will lend purely against market value and will only lend up to a maximum percentage of purchase price too. RJ in short, no. Almost all lenders use open market value, or 180 day value which is the same as a conventional mortgage. Sadly, a handful of lenders will use a forced sale or 90 day value. the 90 days refers to the time it should take to complete the sale to a subsequent buyer so that tells you something about the likely price that it would have to be reduced by. We still get a handful of calls from clients and brokers every week where they haven’t been informed that a lender uses 90 day values which results in an expensive waste of time. in some areas, notably part of London zones one and two, 90 day values can be very similar to 180 day values and that is because


any property that comes on to the market in such areas is likely to sell very quickly. the problem is more marked away from the South east and if there is a local property market that is both depressed and awash with similar unsold properties the difference between the two values could be significant.


I am lookIng for a BrIdgIng loan for a clIent who Is unaBle to evIdence Income, Is thIs possIBle? LB Most bridging lenders will offer a facility whereby interest for the term of the loan can be retained on completion or rolled up, therefore it is unlike a regular mortgage where the lender needs to ensure that there is sufficient income to service the monthly payments. However there are exceptions


to this, mainly when the applicant intends to repay the bridging finance by way of a remortgage and this is because the lender will need to ensure that a remortgage will be viable. if the loan is to be secured against the applicant’s main residence and repaid by remortgaging after the term has expired on the bridge, then there would have to be a good reason as to why they can’t prove income now but expect to be able to for the mortgage. For example, the lender they have


received an agreement in principle from requires three years’ full accounts but they need funds ahead of their accountant having the most recent year finalised. if the property is to be let out and


the exit route is to take out a buy-to- let mortgage, then the lender will require details of the rental income generated by the property as the re- mortgage will be dependent on this.


it’s essential that you ask all of these questions initially as the most important consideration when arranging this type of finance is that the client will be able to repay the loan at the end of the term. generally if your client intends to sell the property which is security for the loan, or another property to repay the bridging finance then there are lenders who will offer a true non-status product provided the client doesn’t want to service the interest monthly. RJ Yes it is. bridging lenders are generally more concerned with the property security then they are with the complexities of an individual client profile. that said, the client must be able to prove identity both as a person and at a registered address. they will also be required in the main to be credit worthy. Most lenders will sense check applications to check the client is fit and proper to borrow money and will have the same reaction as any other bona fide lender if an individual has no experience and appears to be over borrowing. bridging lenders generally prefer


to charge retained interest, which effectively means a client’s loan payments will be deducted from the gross advance and retained until the loan has been subsequently redeemed.


A client therefore doesn’t need to


make additional mortgage payments and the lender has payments in advance so will get paid in the agreed term, whatever happens. on the flip side the client pays interest on interest so ends up paying more than they would do with a conventional monthly repayment.


Bridging introducer july 2011 21


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