GUIDE TO BRIDGING FINANCE
market has opened up considerably
over the past 12 to 18 months. A number of new lenders have
entered it and the resulting competition is boosting the range of products and driving rates down. A few years ago, bridging rates aver-
aged 1.5% a month. Now they’re down to an average of 1.15% a month. That’s a big difference.
Bridging is also the tool of choice because it’s getting faster than ever. For example, we were approached after an application had been rejected by a high street lender because the property didn’t have a bathroom. Ridiculous but true. We offered on the case within two hours of it being underwritten and it was completed, with funds released, in less than 48 hours. Another case we dealt with recently
saw a lender call in its loan on a portfo- lio with no notice and no reason given – an all too common occurrence in this uncertain market. The borrower, in this case a trust with
a portfolio of six properties, needed a solution urgently. Within 72 hours of being approached,
we arranged a bridge of £2.5m, covering the entire portfolio, which gave the trust ample time to refinance to another lender.
Increasingly innovative Property investors are also being attracted by the increased innovation within bridging. Take the medium-term loan, which we introduced just a year or so ago. This was a product created primarily
for landlords, giving them the flexibility to buy now but with the luxury of not having to refinance out for between two and three years. Given the frantic dash by both ama- teur and professional landlords into buy- to-let over the past year or so, the medium-term loan has gone from strength to strength. The icing on the cake for investors is
34 The
that medium-term loans come with rates that are not far off those available on the high street. You can get two and three- year loans of up to 70% LTV at 8.99% per year. That’s not bad at all (for more infor- mation on medium-term loans, see box on facing page).
About the broker But bridging isn’t all about the investor. It’s also about you, the broker. It’s an opportunity for you to boost your in - come, potentially significantly. The average proc fee on a normal
mortgage is around 0.3%. With bridging loans, by contrast, the proc fee can be anything between 0.75% and 1.5%. That’s a real difference to your income. And it’s not just the original bridge
that you make money out of. The added bonus of bridging is the double fee earn- ing potential. After all, when the bridge is up your
client will invariably refinance to a mainstream loan, so you’ll make money out of that, too. You’re doubling up.
Bringing credibility As well as the revenue it generates, bridging is about the added credibility it can bring to brokers. The brokers we deal with offer their
clients certainty in an uncertain climate. With their knowledge of short-term finance, they can offer alternative solu- tions where the client would otherwise be caught short.
An understanding of the specialist finance market and how to leverage it for their clients also gives a powerful boost to their product and brand. We’re in a brave new world for prop-
erty, which many clients won’t under- stand. But you, as brokers, are their first port of call – the link between the old world and the new.
A brave new world In summary then, what does bridging bring to you and your business? First, and most importantly perhaps, it brings
guide to Bridging Finance 2012
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