build a better bridge Bridging can help clients borro each issue Bridging Introducer answers your questions on how to
by lucy barrett, director, Vantage Finance
my client is struggling to sell their home but needs to move now. can bridging help?
LB this is the most basic form of bridging finance and is very much the purpose which a vast majority of people would consider bridging is in existence to serve. We have come a long way from this being the main requirement for short- term finance, with bridging being used as a solution in a much greater range of situations due to the lack of liquidity in mainstream markets. However this is still an option for home movers in a chain break situation where they do not want to lose the property they are buying. this type of borrowing
would come under the scope of Financial Services Authority regulation and must be treated as a regulated sale in the same way as a mainstream mortgage, despite the fundamentals of the product being considerably different, which of course would need to be addressed in your sales process.
RJ Yes absolutely. this type of scenario is one of our most common enquiries. often clients
by rob Jupp, managing director, Brightstar Financial
will lose their ideal property if they can’t complete quickly, especially now when there seems to be a large number of buyers who are not dependent on selling another property. bridging, if done correctly, can easily put someone in the same position as a non-dependent buyer, as funds can often be drawn down in days. that said, clients should remain mindful of the cost of bridging and should be confident that they won’t be left in the same position in six months’ time where they still have a property they can’t sell but also with the unwelcome additional of expensive debt. We would urge clients to remain realistic about how likely it is that their property will sell in the required time before they spend any money on arranging their bridging loan.
i have a client who wants to purchase development properties at auction, what are his finance options?
LB this is a difficult one to give a direct answer to because the term
20 bridging introducer september 2011
‘development’ can be considered in many different ways and each property or plot of land purchased will be different. if we simply start by looking at the acquisition of the property then short-term finance is a good solution to purchasing at auction, due to the fast turnaround times when compared to longer term borrowing. if there is an existing building on the site and the client wishes to buy the property and then apply for planning to make changes to that building, before they can be approved for development funding 70% of the open market value would be achievable with bridging subject to the exit and usual caveats. However if they are purchasing land with or without planning permission they are unlikely to achieve more than 50% loan to value depending on the location and other factors. Some short-term lenders have
development funding propositions which means the client can also borrow the funds to complete the work. Some will only allow this where work is internal, for example developing a large house into self contained flats as opposed to building property from scratch.
RJ Most auction houses allow clients 28 days in order to complete on a purchase from the time the auctioneers hammer signifies that a sale has been made. Sadly, at this stage the average buyer has not had a survey on the property and hasn’t arranged finance. in addition to this, many
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