Wednesday, 16 December 2015
According to the latest Bridging Trends, a quarterly bridging data publication conducted and compiled by MTF and a number of the industry’s leading brokers, mortgage delays were the most popular reason for people accessing bridging finance during the second and third quarters of 2015 (33% and 37% respectively).
A growing number of borrowers have struggled to get a mortgage, especially in the timeframe required, and are faced with an onerous application process and more stringent criteria from banks that have come under greater pressure from regulators following the financial crisis. Borrowers who require quick access to cash have therefore had to rethink their financial arrangements and seek alternative methods of funding property purchases, with bridging loans offering a real-time solution to the funding gap.
A mainstream bank may take several months to put together a loan, but a bridging finance company is often able to make lending decisions within hours of an initial enquiry, meaning funds can be released within days.
A bridging loan can provide a quick and efficient solution in a number of instances, including when a borrower’s mortgage lender lets them down at the last minute, or if a landlord is trying to secure a property at auction and needs financing quickly, or even to prevent repossession.
MTF was recently approached by applicants who were looking to raise £480,000. They had previously exchanged contracts to purchase an off-plan investment asset in South London from a developer for £836,000. With the development almost built, the developer served a Notice to Complete requiring the applicants to complete on the property within 10 days, failing which their deposit would be forfeited and the developer would be free to sell the property at a higher value on the open market.
Faced with such a tight schedule, the applicants were unable to secure a buy-to-let mortgage in time and consequently approached MTF for help.
Following the enquiry, MTF was able to give an immediate decision and issue a loan offer the very same day. MTF worked around the clock to organise a valuation and get the process going.
In a matter of days, MTF provided a £480,000 bridging loan, with no exit fees or early redemption penalty, allowing the borrowers to secure their investment asset and save their £50,000 deposit. Once they had the finance, they then had the time and space needed to shop around and obtain the right buy-to-let mortgage for them.
In short, Bridging finance is an established, real-time solution for borrowers when they are faced with a narrow window of opportunity to complete on a property.