.jpg)
This week I wanted to focus on the factors that come into play when considering the most appropriate bridging finance provider.
This week I wanted to focus on the factors that come into play when considering the most appropriate bridging finance provider....
< 
div>This week I wanted to focus on the factors that come into play when considering the most appropriate bridging finance provider.
This week I wanted to focus on the factors that come into play when considering the most appropriate bridging finance provider.Like many distributors, packagers and master packagers, we manually source the most appropriate funder, based on our knowledge of the industry and the lenders we deal with. Sourcing systems can accurately compare interest rates, fees and total cost of borrowing and when sourcing mainstream mortgages, I guess this is probably the most important factor. Not surprisingly then, the choice of mortgage product is often (if not always) led by rate and price, with cheapest being ‘best’. Right?
Not necessarily where bridging is concerned. Price is often identified by the broker (and client) as the most important factor and I guess it goes without saying that the client wants the cheapest deal and pricing is always a factor when sourcing a bridging product. However, unlike mortgages, bridging is usually not serviced by the client making monthly payments, with interest usually being retained or rolled-up. With the MMR changes, this will be true in almost every case, as lenders do not want to get involved in assessing client affordability when considering bridging loans. After all, the majority of clients, irrespective of how much they earn, are unlikely to be able to afford to service debt at bridging rates.
Add to this, the other factors behind why a bridge is required in the first place. For example, the property is not suitable security for mortgage purposes due to disrepair, no kitchen, heating or bathroom etc. Funds are required quickly, perhaps with an imminent completion deadline to meet. There are often over-riding factors outside of pricing that determine a bridging deal.
Even once a deal has been identified as a bridging loan, rather than a mortgage, the choice of who to place it with is again often not governed by price alone. I have had two examples this week where clients and brokers have insisted on going with the ‘cheapest’ option, based on headline rate. In both instance the deal had to be replaced to another funder, at a higher rate, because of issues with either valuation, legals or both. At this point, the client has usually spent money on survey and legal fees and it will have also cost them probably 7 to 10 working days in time.
Recognition and praise to friends, Marc Goldberg, Jamie Jolly and Zac Zorno at Lancashire Mortgage Corporation who were particularly helpful, flexible and worked really quickly to get some difficult deals funded, by making sensible lending decisions, where some other providers had let clients down. Thank you guys!
In the current climate, most lenders will not work off a re-type, insisting on their own surveyor to inspect the property, meaning a second valuation fee is payable. There may be abortive legal costs from the original funder’s legals and a new fee undertaking is usually required for the second lender’s lawyers. Couple with this the loss of time and the ever looming completion deadline and risk of losing the property or worse still, deposits have already been paid and contracts exchanged.
The point I am trying to make is consult a bridging expert – someone who knows the bridging market inside out. The wrong choice of bridging lender can cost the client dearly. We pick up numerous deals where the original bridge has fallen through at the last minute and we are left to pick up the pieces. There is a ‘right’ funder for every deal. It is a case of identifying it from outset so as not to waste time and money, even if it means not going with the cheapest provider. All you have to do is ask a client that has lost a deposit to see which they would prefer…
Leave a comment