A Second Approach by Tomer Aboody

Friday, 31 March 2017


 An increasing number of people in need of extra cash are turning to second charge bridging finance to purchase investment properties, inject capital into businesses, or make refurbishments in order to prevent disturbing their existing attractive mortgages.

According to Bridging Trends data, a quarterly publication conducted and compiled by MTF and a number of the industry’s specialist finance brokers, £86.9m of second charge bridging loans were completed by its contributors in 2016, representing 18% of all bridging loans throughout the year.

This is a significant increase on the year before, when the contributors completed £67.4m of second charge bridging loans, representing 15.5% of all bridging loans throughout 2015.

Demand for second charge lending is set to continue to increase throughout the year. In a sustained low interest rate environment, it now often makes more sense for a borrower to release equity on an investment property by taking out a second charge, rather than refinancing away from their current deal.

What’s more, the SME sector is largely underfunded. Business owners need more innovative options, tailored to meet their needs, and one such source that has become a critical tool to fund the SME community is bridging finance.

At MTF, we believe a second charge bridging loan is about empowering borrowers to enable them to take advantage of time-sensitive opportunities that can make or save them money.

As an example, MTF helped a client who required £1,000,000 to expand their business abroad. Funds were required very quickly so that the client could take advantage of a great business opportunity.

The client was a main shareholder in a listed company and owned a property worth £2.25m with an existing first charge of £460,000. However, the client’s mortgage lender refused them finance due to their irregular income structure.

As a non-status lender, MTF did not require proof of income. Instead, we focus on the suitability of the investment property in question and the client's future plans. This allows us to take a practical, common-sense approach to lending. We provided a second charge bridging loan, over an 18-month term at 66% LTV, on open market value.

By taking out the bridging loan, the client was able to expand their business abroad, using the funds to pay for the initial operating costs, and the 18-month term gave the client plenty of time to arrange and secure a business loan with a different bank, in turn settling the bridging loan.

A second charge bridging loan can be secured on all property types, including buy-to-let, residential and commercial assets, and typically has a 12-month maturity, unlike a secured loan which is a form of longer-term financing.

Second charge bridging loans will continue to offer significant financial savings for a wide range of borrowers, not just those who may struggle to obtain finance through traditional routes.

At MTF we welcome second charge applications and are actively looking to provide liquidity to the SME sector.

MTF is a leading bridging finance lender specialising in short term loans including auction finance, bridging loans, both first and second charge loans and are recognised throughout the industry for its speed and service.

Established in 2008, the company has won multiple awards including Best Service from a Bridging Finance Provider at the Business Moneyfacts Awards 2014, Best Bridging Finance Company at the Financial Reporter Awards 2013 and Best Service from a Bridging Lender at The Bridging and Commercial Awards 2013.