ow short-term at higher LTVs build a better bridge and do the right thing by your client
properties are only at auction because they haven’t sold in the conventional resale market so they may not be mortgagable. therefore, conventional residential or commercial finance may not be able to be achieved. bridging finance was made for property auctions. deadlines aren’t an issue, nor is property condition (in the main). clients can complete using a bridge and if they are planning to hold on to the asset they can usually refinance after six months.
my client is purchasing a property and needs to borrow the entire purchase price, are there any options available through bridging?
LB there are two options which can be looked at here, the first being whether the purchase price agreed is below market value or not. if the client has secured the property below market value for any reason there are lenders who will base their lending on the open market value, usually subject to a maximum LtV on the purchase price, such as 85%. Some will lend up to 100% of the purchase price; the client will just need to fund the fees and interest independently.
Another angle is to look at the
client’s assets and liabilities for any property which could be used as additional security, which includes investment property, commercial, or even taking a second charge against the client’s
home should there be sufficient equity.
RJ this can be achieved, especially if the client has other property that a short-term lender can secure against. the easiest scenario is if this additional security is unencumbered as this is quick and easy to arrange and especially so if the client is downsizing. Some lenders will be prepared to take so called comfort charges on other property as a way of ensuring that the client makes every possible effort to pay back the loan in the timeframe that’s been agreed.
the nacfb’s annual survey of its members shows that short-term lending rose by 180% over the past year. how can i enter this market?
LB there is no easy way to start producing volume in the short- term finance market, it very much comes down to your mindset when speaking to new and existing clients, and your ability to spot an opportunity.
Where short-term lending has replaced mainstream lending in many situations due to the lack of availability, it creates opportunity where you may have otherwise turned your client down unable to help. Familiarise yourself with common situations where short- term funding can be used, which is easy to do with so much literature and marketing material
around, and try and think of how you could apply this to past enquiries which you may not have been successful with, or clients which you have helped in the past where that solution might not be available should they come to you with similar requirements in today’s market. there are obvious ways that
you can advertise for new clients targeting the right profile of client, such as property professionals, but it is a very competitive market which may result in a lot of money spent to no avail.
RJ the nAcFb statistics on bridging were certainly headline grabbing but i would throw some caution to the wind. bridging is definitely enjoying massive profile currently and there is certainly more deals being done this year as opposed to last year, but i don’t see the sector growing as exponentially as these statistics would suggest. Any new entrant should do their research carefully, understand that the ‘bridging dance floor’ is very crowded and have enough capital to employ decent staff in key positions, particularly in operations. they should also be mindful that cost of funding is quite keen presently and if they can’t compete they shouldn’t waste their time or money. that said, if it’s done correctly, there is still good business and margin to be had even if someone arrives late at the party; Precise is a great example of this.
Bridging introducer september 2011 21
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