Residential Property Bridging Finance

housesThere are different types of bridging loans and each may attract different terms from the lender.The main difference is if the loan is secured on your primary residence or on another property and if it’s another property is it occupied or unoccupied.

Also when the lender assesses the loan to value they are willing to offer and if indeed they want to lend at all there are many factors.

These include but not limited to:

  • Liquidity/confidence in the UK property market at that time
  • Properties condition i.e. does it have a working kitchen and bathroom
  • Is the property structurally sound, is it derelict, semi derelict, Japanese knotweed, non standard construction has it got dry rot, wet rot, or wall tie problems
  • If the property is a freehold or leasehold, and if it’s a lease hold how long the lease is
  • Is the property a conventional house or flat or is it an HMO
  • Is the property ex council or local authority
  • Could the lender suspect a sale and rent back arrangement
  • Has the previous owner owned the property for 6 months or less
  • Has the borrower got a reasonable credit score and track record in property transactions
  • Has the borrower got other properties that they own even if it’s not necessary or they are unwilling to sign them away
  • Has the borrower got good personal income and a monthly surplus after their normal monthly outgoings
  • Has the borrower got an acceptable exit from the bridge finance like sale of another property (between exchange and completion) or a conditional mortgage offer whether it be owner occupier or but to let

Unmortgageable Properties

These properties can include properties that are leasehold with a lease of less than seventy years. Also properties under fifty thousand pounds.  Lenders are very fussy about property close to mines, areas of landfill, flooding or subsidence.

Sitting tenants and Regulated Tenancies

Most lenders are unwilling to lend against property with long term sitting tenants.  Regulated tenancies come under a similar category.

Leasehold property with a defective lease

Sometimes novice landlords don’t use proper solicitors to draw up lease agreements.  A poorly done lease in the land registry can result in a lenders rejection for that property.

Properties with Boundary disputes or other legal problems

Planning applications need to be done correctly or a lender may find the property unfit to mortgage.  Buy to let lenders don’t like properties with boundary disputes either.

Open Bridging Finance

Open bridging loads are loans that don’t have an exact date of repayment

Closed Bridging Finance

Closed bridging loans have a fixed cut off where the loan has to be paid back

Reasons for getting residential property bridging finance:

Chain breaking – when a property purchase is under threat by the breakdown of the sale of another property

Buying at auction – property purchase where completion is required very quickly

Refurbishment – when some long term mortgage lenders refuse to lend based on the properties condition. The bridge can allow time for work to be completed then longer term finance can be put in place

Cash purchase – secure funding on an existing property to make an all cash purchase of another property. Having cash can allow for a very fast purchase.

http://en.wikipedia.org/wiki/Bridge_loan