twat

How to add value to your property

People do up their homes for various reasons, such as making them more attractive or repairing damage caused by wear and tear. However, adding value to the property is the number one motive. This motive is often fuelled by the desire to sell, now or in the future, to make a profit, whether the intention is to downsize, fund a new home, or develop a property.

Whatever the reason, you will only add value to your property if the money spent on the house is lower than the property’s ceiling value. Just because you spend £20,000 on a property doesn’t mean you will make a profit or even get it back. Most areas have a ceiling or guide price that you should check out before you make a decision. Click here to check the value of other properties in your area and speak to a financial advisor.

Investing in Property Value 

large changes to a house hold can increase the value of a property significantly, as long as it is still reasonable for the area. Here are a few of the top large investment ideas.

  • Basement Conversion: If your house has a basement that is not yet converted into a living space, get yourself a quote asap! Basement conversions on average increase property value by around 30%. While it may be possible to add a basement to an existing property, the complications of doing this can cause the cost to be very high and take a long time, meaning this may not be a profitable move.
  • Loft Conversions: If you can’t go down, try going up! Loft conversions are very popular these days as they can add an extra bedroom and even a bathroom to the house. Once you have been able to get planning permission that is. This is ideal if you have the space for a new stair case. If you have a flat roof, consider converting to a pitched roof!
    Garage Conversion: The garage space its self can easily be converted into an additional room, simply by converting the garage door into a brick wall with a window. You can also add a front door and ensuite bathroom to create a studio apartment, creating a perfect care home for elderly or unwell family members looking to retain their independence.
  • Barn Conversion: Barn conversions are a great way to add value, especially if they can be rented out. Not only do you have the benefit of profit when selling, but also throughout the year.
  • Layout changes: Sometimes properties are built with unusual layouts that do not fit with the way we live our lives. This doesn’t just mean adding bathrooms and moving kitchens, but also  building and knocking down walls, moving windows and doors, even stair cases if necessary!
  • Porches & Conservatories: Porches are a great little addition to any house, it creates a space where family members and guests can remove outdoor shoes and clothing, limiting the mess inside the house. Conservatories not also serve the same purpose as the porch, but also make great play rooms, offices and relaxation/entertainment spaces. Just make sure you invest in underground heating and a solid roof to help with temperature control.
  • Extensions: Many detached or semi detached houses have an entry way to the garden round the side of the house. Extending the house into this area will most certainly add value, whether it is for a garage/utility room, bedroom, apartment or simply to expand the size of existing rooms. You may even prefer an extension at the back of the property!
  • Landscaping: There are 2 ways you can use landscaping to add value to a house, the first option is to keep things simple, level ground with grass or slabs. The second way is to turn your garden into a paradise, add a pond plant beautiful trees and flowers, maybe even an outdoor kitchen or summer house!

Smaller Changes

If you don’t have the time and money to invest in your property, smaller changes can add value to make your home more appealing to potential buyers, and help ensure your property chain is motivated to reach completion. 

  • New windows & doors
  • New boiler & gas safety certificate
  • Electrical safety
  • Kitchen renovation
  • Bathroom renovation
  • Plastering
  • New flooring and carpets
  • Painting / Wall papering
  • Skirting & coving

While some of these must be completed by professionals, there are other ways you can increase the value of your property yourself without breaking the bank

Funding Recommendations

If you do not have sufficient savings to invest, you can consider financing improvements with a bridging loan. Bridging loans are large, short term secured loans that let you quickly release equity in your property to increase the overall value. Unlike a mortgage, there are no repayments until the property sells or the loan term ends. You can make the most of your bridging loan by making sure materials, planning permission, and contractors are in place, so work can begin and finish as soon as possible.

If you are ready to make a larger profit in a shorter time frame and move on to your next home, renovating is the key to selling quickly.

Friends Capital has access to lenders with the best bridging loan rates on the market today. Contact us to learn more or apply here.

 

A Simple Guide To Secured Loans

If you need money for any purpose, you may be considering a loan, and you will need to know the difference between an unsecured and secured loan. An unsecured loan is offered based on your credit score and circumstances, whereas an asset backs a secured loan with its financial value, making it easier to attain.

The financial asset could be a car or home, and the lender may use it to recoup the outstanding loan value if you fail to pay. This security gives lenders confidence to lend to you and motivates you to make your payments on time.

The benefits & drawbacks of secured loans

There are benefits and drawbacks to taking out a secured loan. Secured loans usually have a lower interest rate, and you can borrow a more considerable amount. However, your collateral is at risk, and approval usually takes longer compared to unsecured quick loans.

There are also different types of secured loans:

  • Vehicle loans – This type of loan is secured against a car, truck, boat, motorcycle, or lorry.
  • Bridging loans – These are short term loans lasting between 1 and 18 months. You can take out a bridging loan and use the money for any purpose. Interest is rolled into the loan, which means there are no payments until the loan’s end when the value and interest become due. At this point, you can either pay back the loan or refinance it.
  • Property development loans – These are similar to bridging loans, but they are for property developers. Developers use the funds to buy land, pay for renovation and building work, or free up working capital.

If a secured loan defaults, the lender may repossess your car, or you might lose your home or any other collateral you leveraged to attain the loan. The lender can put a lien on your asset, which is essentially a lender’s claim to the security. The loan company can take ownership and sell the property or vehicle to recover their losses. You may still end up owing money if the sale of the asset doesn’t cover the outstanding loan amount and interest.

Top 3 FAQs

  1. Are secured loans easier to get than unsecured loans? Yes, the security shows that you have the means to pay back the loan, even if you were to lose your income.
  2. Do secured loans affect your credit? If you default on the loan, you may end up with bad credit, and the default will remain on your credit report for up to seven years. If you get into financial trouble, make your lender your first call, who may be able to help by restructuring your payments.
  3. How can I get out of a secured loan? You can repay the loan or refinance the loan.

Friends Capital have access to the cheapest bridging loan rates available to any borrower on the market today. Contact us today to learn more about what we can do for you.

How lockdown has affected the financial & housing markets

Open for business despite lockdown

As we enter into a second lockdown, we began to think about the impact that this would have not just on our company, but for everyone in the finance industry and the housing market. From brokers, lenders & borrowers to estate agents and more, here are our thoughts on how we stay open for business despite lockdown.

How lockdown has affected the market

Thanks to the first lockdown in March, many lenders such as banks and building societies continue to operate in safe working conditions, whether that’s from home or in socially distant offices. There has however, been delays in house buying chains due to surveyors & solicitors creating longer mortgage agreement times. 

How lockdown affects lenders

Lenders are also starting to show caution as the number of available products has decreased, with the higher LTV products (i.e. 90 – 95%) have all but disappeared. This is a sign that banks and lenders are factoring in a weaker economy. We are starting to see other products enter the market to combat this issue, for example, 100% LTV guarantor mortgages, however people interested in this type of mortgage are strongly advised to learn more about how these work beforehand.

How lockdown affects Brokers

Here at Friends Capital, we don’t expect a second lockdown to have a significant impact on how we operate, as we too can continue working from home. Due to the previously mentioned mortgage agreement delays, we are still catching up from a backlog in March. We are also beginning to see customers cancel applications as property chains break down and lack of job security. 

Our solution to dealing with this problem is to raise awareness of bridging loans. In a nutshell, bridging loans are high value, short term loans that help prevent property chain breakdown. These work by lending property owners the money they need quickly, so they can move into their new home with the freedom to sell their secured property outside of the property chain. Even if you have no income or a low credit rating, learn more about bridging loans here.

What can borrowers do during lockdown?

If you were hoping to move but are facing issues caused by lockdown, it might be time to consider how else you can add value to your property. Secured loans for property development can help you to add an extension or loft conversion that will increase the value of your property once the market begins to get some wind behind its sails again. Bridging loans can also help finance this type of project. 

Apply for a bridging loan today and make the most of the stamp duty holiday.

In summary, even if the lockdown extends beyond November, we as a company will still function as long as there is a strong demand for mortgages. Mortgage agreements might take longer than usual, but we will always be here to advise whoever comes knocking on our doors (figuratively of course).

Worst-case scenario, a long term lockdown could result in banks ceasing to lend as they did in 2008/9. However, as the impact of this on the economy would be disastrous; it’s unlikely it will happen. The best thing all of us can do is carry on as close to normal as we can. 

 

 

Options For When You Need A Short-Term Loan

For borrowers looking for short term loans, there are loads of great options. In this article, we are going to lay out the pros and cons of some of the most popular short-term loans, so that our readers can be as informed as possible. 

Payday Loans

Payday loans (also known as ‘quick cash’ or ‘quick loans’) are among some of the most accessible loans out there, often seen to be a good fit for people with bad credit who need money quickly. Some lenders even offer access to cash within 24 hours. Applications are quick and easy, either done over the phone or via an online form. The process can take minutes. The majority of loans, like mortgages or business loans, require extensive credit checks and personal information. Payday loan companies only need a few essential criteria to be fulfilled. These include having a stable income and a bank account. It is easy to see why quick and fast cash without many barriers would be attractive to borrowers. 

They also aren’t secured to a property, so if you’re unable to pay your house isn’t at risk. That doesn’t mean there aren’t huge risks. Payday companies are known for passing debts to collection agencies and taking debtors to court. Payday loans are highly expensive, with costs rising exponentially as the debt goes unpaid. It is by far the loan with the highest interest, two or three times higher than credit cards and personal loans. They don’t help you build a credit score, and are considered predatory due to their focus on people who are in desperate circumstances and can’t go anywhere else. 

Credit Cards

A credit card is a loan that gives you a line of credit of a pre-accredited amount, called a ‘credit limit’. When you spend that money, your bank or credit card company loans you that money to make a purchase. Credit cards involve monthly payments either for the whole debt, a partial amount or for a monthly minimum payment. Most card companies give users a grace period of 20 to 30 days before any interest is put on top of the amount they owe. 

With credit cards, you can buy now to pay later. You don’t have to set out a repayment schedule like with bridging and payday loans. The money is available, and you can organise how to pay it when it is convenient for you. Credit cards are flexible – you choose how much you repay. The minimum monthly repayment is often very low, between £5 and £25, so you don’t have to find the money right away or pay it off in one go at all. 

Credit card debt can build up gradually, making it dangerous for people with excessive spending habits. The cost of spending on a credit card and repaying it within a few months is often reasonable. However, when debt is left unpaid, debt can mount up quickly. Missing payments can significantly damage your credit score, affects your ability to make large purchases like buying a home.

We strongly recommend getting unbiased and free financial advice from sites like the moneyadviceservice.org.uk and moneysavingexperts.com or debt consolidation companies before going down either of these avenues so that you can learn more about sensible and responsible borrowing.

Bridging Loans

Bridging loans are different to the above lending options as they are large amounts secured against a property or asset.

Bridging loans act a bridge between when funds are needed and when funds are going to be released from an asset, most commonly a property. Individuals, property development companies, and corporations use bridge loans to provide funds on short-notice notice. Bridge loans can be small and large loans. 

Bridge loans are priced monthly instead of annually because they are designed to be taken out only for short periods. They have higher than usual interest rates because funding is easily and quickly accessible. Credit histories aren’t as relevant as, for example, mortgages because bridging loans are secured against an asset. 

Borrowers should be aware that they should have a clear repayment plan in place; this involves typically selling a property at a later date or remortgaging the house in question. Most bridging loans have predictable costs when there is an exact repayment schedule. 

We have access to lenders with the best bridging loan rates in the UK. Contact us to learn more or apply for a short term bridging loan here.

 

 

Making The Most Of The Stamp Duty Holiday Extension

What Is Stamp Duty?

Stamp duty or Stamp Duty Land Tax (SDLT) is a tax applied to house purchases in England and Northern island. It is named so because there had to be a stamp on crucial documents for a house purchase to exchange. The tax applies to freehold and leasehold properties, and for mortgaged properties and those purchased outright. 

What Is The Holiday? (What Has The Government Done and Why)?

Earlier in 2020, Chancellor Rishi Sunak put stamp duty on a holiday, pausing it for properties costing less than £500000 until April 2021. This was to allow for the economic fallback from the pandemic. Many in the property sector are asking Sunak to extend the stamp duty holiday six months to prevent an overload for those working in the property industry.

When Is The Deadline, And Why Do You Need To Start Looking Now?

Financial services giant Legal & General say that those that want to take advantage of the stamp duty holiday should start their search by November 1st 2020. Others say that December 1st could also be suitable, giving buyers 16 weeks from the end of the stamp duty holiday. 

The process of purchasing a property is taking longer than usual, due to a backlog of people wanting to take advantage of the reduction in stamp duty. Legal & General estimate that purchasing a home takes approximately 15 to 17 weeks, with the latter being more appropriate for buyers with more complex requirements.

However, a second lockdown could throw a further spanner in the works and may halt property purchases altogether. To compare, before the pandemic, a mortgage application for a buyer with straightforward circumstances would take about two weeks.

Experts have suggested to chancellor Sunak that perhaps a tapering of the stamp duty holiday would be more appropriate, considering the uncertainty of Britain’s economy. 

Can Bridging Loans Speed Up The Process?

Bridging loans are fantastic between times when funds are needed and when funds are going to be released from an asset, most commonly a property. They are short term quick loans.

Bridging finance is an excellent way for homeowners and property developers to speed up the process. They are perfect for property purchases and sales because funding is easily and quickly accessible. Most bridging loans have predictable costs when there is an exact repayment schedule, and so are great for when buying a house in a time-sensitive situation. 

Bridging loans can help avoid a lot of the stress associated with property purchases and property investment

Funds are released quickly, and credit checks are not as extensive as the equity of your property secures the loan instead of your credit history. Bridging loans are a great option, even for those with bad credit. 

 

Who said 100% Mortgages were dead?

Not us…but yes there is a catch, well, sort of…

If you’re a first time buyer with parents (or grandparents ) that own their house with little or no mortgage and who are willing to lend a helping hand, then we could have the answer to getting on the property ladder.

 

Meet Beth and Luke. Head over heels and newlywed after falling in love in the workplace and moving into rented accommodation 2 years ago. Well it just so happens, they loved their little starter home and were distraught at the thought of moving out when they learned their landlord decided to sell.

Step forward equity rich parents who wanted to help out. Unfortunately however, they didn’t have the £24,000 cash deposit required (well they do like a night out, or did pre-Covid !) for the usual Mortgage application. 

We managed to obtain for them 100% of the purchase price as a mortgage as they had good jobs, incomes and credit ratings, and the parents were willing to use the equity in their property to guarantee part of the mortgage without having to hand over any cash.

The win/win is they now have the house, with a mortgage payment lower than their monthly rent and no threat of a landlord asking them to leave at any point.

The only downside is their parents now seem a lot more interested in Beth and Luke’s` financial welfare when they drop-in, which is frequently! 

Obviously, there are lots of complex questions around affordability, responsibility and conditions with this product and should be only undertaken after a lengthy conversation with a qualified mortgage advisor who can give totally independent advice.   

Contact us to learn more about guarantor backed 100% mortgages to see if they are right for you.

 

 

Why Bridging Loans Are Good For Property Development

Bridging finance is a unique way for homeowners and business owners to embrace short term loans. Bridging loans act as a literal bridge between the times when funds are needed and when funds are going to be released from an asset, most commonly a property. Individuals, companies, and corporations use bridge loans to provide funds on short-notice notice for short periods.

They are perfect for property purchases and sales because funding is easily and quickly accessible. Most bridging loans have predictable costs when there is an exact repayment schedule, and so are a great fit for inclusion in property development projects.

Money Makes Money, Fast money makes money faster!

Refurbishment projects can require a lot of money, especially where the model is to buy a property, refurbish and then immediately sell it. Because of this, many property projects involve multiple partners; some that provide financial investment and others that manage the construction.

Some people prefer to fly solo, and some property companies would prefer not to bring any more partners than necessary. In any case, the property investment market is highly competitive and successful development projects require appropriate funds at speed.

The benefits of Bridging Loans

A bridging loan can be a great solution. Here are some reasons why:

Finance can be secured very quickly. Grabbing the right property at the right time and the right price is the difference between the success and failure of an investment project. Having the funds on hand is the key to doing that. You can put this in place ahead of time, making sure that you know exactly how and when your provider can get the funds to you.

Bridging loans can be great for grabbing great deals at property auctions, where deals are quickly snapped up, and easily accessible quick loans are invaluable. A bridge loan can also avoid a lot of the stress associated with property purchases. It is a great idea to build a good relationship with your lender so that you can continue to rely on them for funds to be delivered promptly.

Bridging loan lenders are more flexible when it comes to credentials and credit histories. They prefer to give a loan on the security of an existing property. Once the legitimacy and the value of the property have been approved, getting a bridge loan is quite simple.
Though a bridging loan needs to be repaid in a short period, e.g. likely within 12 months, providers are usually flexible as to the repayment schedule.

Friends Capital are brokers with access to lenders with the best bridging loan rates on the UK market, contact us for a free, no obligation bridging loan enquiry.

How Bridging Loans Can Help Divorce Settlements

What do Bridging loans do?

Bridging loans help you to bridge the gap while you wait for funds to be released from an asset like a home. Individuals, companies, and even large corporations use bridge loans to provide funds on short-notice notice for short periods. Bridge loans are traditionally used by individuals to secure funding for a property while waiting for an existing home to sell. It can be an excellent option for times where funds are needed but temporarily unavailable. There are however, other situations in which a property owner would need access to the equity in their property. 

What are the benefits of a bridging loan for divorce?

Bridging loans can also be used to facilitate a divorce and increase chances that the dissolution of the marriage goes as smoothly and amicably as possible. The majority of legal divorce proceedings are centred around the division of assets. This can be difficult when assets need to be liquidated to be proportionately divided. This is where a bridging loan can help. 

Example: A couple has agreed that it is best for them to separate, however they both want the maximum value out of their property. Rather than living together in what could be an uncomfortable environment, or selling the property quickly at a lower price, they can apply for a bridging loan. This will release equity from the property, allowing one partner to move out asap, giving both parties time to sell the house at market value or get a remortgage to keep the house permanently. 

The bridging loan can limit the damage created from divorce. Keeping unhappy couples together can lead to a bad divorce and a prolonged period of unhappiness. This can create resentment and make divorce proceedings more complex than they need to be, meaning all parties lose out in more ways than one. 

What are the risks with using a Bridging loan for divorce settlements?

There are 2 common concerns with all bridging loans, the first being the fees, and the second is the possibility of a no sale by the end of the term. Other complications can arise if there is a current mortgage on the property, or if there are issues with the housing market meaning the couple are stuck in negative equity. There may be concerns about eligibility for a remortgage.

Friends Capital are mortgage specialists that provide bridging loans with the best rates on the UK market. We provide unbiased financial advice to ensure all parties are fully informed of the options available to them and the pros and cons of each choice. 

Apply for a bridging loan today.

 

 

The benefits and drawbacks of downsizing to a smaller home

Downsizing your home is a big step, but for many, it can be beneficial and sometimes even essential. Homeowners often find themselves at a crossroads when they experience a significant lifestyle change, that leaves them with a house that is too big for their needs or abilities. A smaller home nearer to loved ones or more comfortable to navigate can seem like a natural choice. In this article, we will look into the reasons why people downsize and also the advantages and disadvantages to consider. We will also show you how you can downsize quickly without getting caught up in a property chain.

Reasons to downsize

  • Equity Release
    There are two main reasons why homeowners would want to access the equity in their property, retirement and financial necessity. 
    When homeowners reach retirement age, they find themselves with the freedom to fill their lives as they please. In this situation, they may want to take some value out of their property to enjoy things like holidays. Those downsizing due to financial necessity, are likely to need the equity to pay off any debts and find a property with more manageable living costs, to reduce their outgoings.
  • Age / Disability
    For some, it may be that the challenges of looking after a large property are no longer feasible. Mobility issues can increase the need for stairless properties such as bungalows, and create a need to be closer to friends, family, work, shops and hospitals for easier access to care and facilities.
  • Unoccupied space (empty nest)
    When children have grown up and moved out, it creates a lot of empty rooms, rooms that begin to collect dust or take time and money to keep clean.
  • Emotional Cleanse
    When people experience an emotional tragedy such as bereavement, divorce or break up, they may find that their large house acts as a constant reminder. They may choose to relocate to a smaller property elsewhere in an attempt to heal themselves emotionally and mentally. 
  • Area upgrade
    You may be interested in downsizing so that you can move to a smaller but nicer house in a more affluent area. Look into areas with good local schools, close community, ample shopping and entrainment as well as street cleanliness, and low clime rates.

The advantages of downsizing?

Aside from the possibility of getting out of stamp duty when you buy and avoiding passing on inheritance tax when you’re gone, here is an extensive list of all the possible benefits you could receive when you choose to downsize. 

  1. Reduce outgoings (lower bills)
    Being in a smaller property naturally means lower bills, less gas, electric and water, not to mention lower council tax and home insurance.
  2. Pay off mortgage & debts
    With the released equity, you can pay off any outstanding balances on mortgages, loans, credit cards, financed purchases and any other obligations.
  3. Greater disposable income
    Use the money to enjoy your life and create memories. Go on holidays or cruises, buy a caravan or motor home, join a club or find a hobby.
  4. Financial Freedom
    Releasing the equity in your household and downsizing gives you the financial freedom to choose what you want to do next. You can change your career, start a business, take some time off or even retire altogether.
  5. Easier & Cheaper property maintenance
    You no longer need to put time, effort and finances into cleaning and maintaining spaces that are either no longer or rarely used. Smaller properties are also usually cheaper to repair when things go wrong.
  6. Comfortable living
    If you choose to retire early or take some time off, the money can help you live comfortably. Smaller rooms are much more cosy and warm quickly & live in comfort during as you age.
  7. Reduce carbon footprint
    Smaller properties require less energy, which means the consumption of fewer resources. This is especially true for modern properties and tiny homes, that are well known for being environmentally friendly, thanks to advanced insulation and efficient central heating systems.
  8. Re-gifting space
    Larger families would enjoy and appreciate a bigger property and make better use of the rooms. Allow other families to make new treasured memories.
  9. Maintain independence
    Having a low maintenance property means that you can look after your home and yourselves for longer when mobility becomes an issue. You can even put the money into making the property senior-friendly, or allocate some for live-in care or an assisted living.

The disadvantages of downsizing?

While there are a lot of disadvantages or risks to moving, we aim to focus only on those that are relevant to downsizing.

  1. Less space
    The most obvious drawback to downsizing is just the reduction of space. For many, floor space and even ceiling height is very important when it comes to comfort, happiness and clarity of mind. There is also limited storage, so the space you are in could become more cluttered.
  2. Cannot entertain guests
    Depending on how small your new property is, you may find it more of a challenge hosting guests both for daytime events and overnight, which can also have an impact on your social life
  3. Selling off belongings
    You will find yourself having to part with many items that you have developed an emotional attachment to simply because you may not have space. You may also make a loss on some of your belongings as you need them gone asap or
  4. Change of lifestyle
    You may find that you need to change how you spend your spare time, especially if for example you used to have a pool table or home gym. You may also need to change your shopping habits as storage, floor space and display surfaces will be limited.
  5. Small doesn’t necessarily mean cheap
    Be careful that the move you are making isn’t going to cost you more in the long run. The property may need more work, or the living costs of the area could mean the released funds disappear quicker than expected or planned.

Overall, when done right, downsizing might be the best decision you ever made! Just make sure you seek guidance from a financial advisor to make sure it will not only benefit you financially but also make you happier. Be confident that it will improve your life.

Help with downsizing

For most, moving house can be stressful, and the possibility of a house sale falling through or a break in the property chain can make downsizing seem unmanageable. A short term bridging loan could be the solution for getting a large loan quickly, as we can get you a quote in just a few minutes and the money in your account in just 2 – 3 weeks.

Friends capital offer the best rates on the market, and you don’t have to pay us anything until your current property sells or the loan term ends. Contact us today to apply for a bridging loan and speak with one of our financial experts. 

Everything you need to know about Bridging loans

This article covers everything you need to know about bridging loans. We’ll explain what a bridging loan is, discuss whether bridging loans are a good option for you and tell you how much a bridging loan will cost. We’ll lay out the advantages and disadvantages, as well as giving you some practical information on how you can pay them back. We will be updating this article periodically to provide answers to more of your frequently asked questions.

Friends Capital are mortgage and loan specialists. We are one of the UK’s leading brokers, with over 30 years of experience. Friends Capital work with all of the UK’s top financial institutions, bringing you the very best the market has to offer. We’ll find the perfect solution for your needs, clearly explaining the pros and cons of different options. 

Apply for a bridging loan today or speak to our loan and mortgage specialists.

Is a bridging loan a good idea?

It’s a fantastic option for short-term periods where quick and easy finance is required. However, bridging loans aren’t designed to be a long-term solution, and so aren’t a good idea for when you need finance for over two years.

What is the meaning of bridging loans?

Bridging loans, help you to ‘bridge the gap’ between periods when finance is easily accessible to you. For example, bridging loans can help homeowners purchase a new home while they wait for their current one to sell. In this situation, your existing home will be used as collateral. Bridging loans are short-term learns, usually up to one year. 

How do bridging loans work?

Bridging loans are different to remortgages as they are not dependent on income, but are backed by the value of the property you own.  Typically interest rates are higher than other loans & mortgages as the interest is charged monthly, however these do not have to be paid until the end of the term when the borrower has secured permanent financing.  When you apply for a bridging loan, the funds can be ready to go in your account in around 1 – 2 weeks, meaning you can proceed with a house move or development without delay. 

What are the pros and cons of bridging loans?

Pros:

  • Funds are available very quickly
  • Interest paid on completion
  • Lenders are more open-minded about borrowers with bad credit histories.
  • There are no exit fees for early repayment.
  • Avoid wait times due to property chains

Cons:

  • Higher than average interest rates. Lenders can’t make as much money over time as with a mortgage, so it can cost more to take out a bridging loan. 
  • Lending rates vary wildly; there are some fantastic opportunities to take advantage of, but terms and rates aren’t as uniform as other loan types. 

How much is a bridging loan in the UK?

Many factors affect the kind of bridging loan rates you could get from a lender. If you want to take out a bridging loan for a house purchase, the lender will calculate the loan based on the value of the property you currently own. Lenders of bridging loans will give an amount based on the maximum loan to value (LTV) amount, which is typically between 70-80%. 

How To Choose The Right Broker For Your Bridging Loan

So, you need a bridging loan. You should be as well informed as possible. Try to work out precisely what timescale you’ll need the money for and when you reasonably think you’ll be able to pay it back. 

Don’t forget, the ideal situation for a bridging loan is where you are confident in knowing when you will have access to the funds to repay the loan eg. the future sale of a property. Your repayment plan is also known as your ‘exit strategy’ because its how you’ll complete the bridging loan. The more organised you are, the more likely it is that a potential lender will give you the loan that you want, as they will be confident that you will pay them back their money promptly. 

 

What are my options for a Bridging Loan?

When considering which option is right for you, think about the following questions.

What are the terms of the loan? Terms can seem pretty similar between lenders, but that is not necessarily true. Make sure you understand precisely how lenders will charge interest and if there are any penalties for early repayment.

What are the interest rates + fees? There are often lots of different costs involved, so it is vital to get expert advice. That way, you’ll be able to properly understand which offer is most attractive and find the best bridge loan rates

How long is the loan term? For bridging loans, this is usually up to 12 months, although lenders can offer bridging loans for longer at their own discretion.

What loan to value (LTV) are you borrowing at? You may be able to borrow up to 75% of the value of all property you can offer as security (this may allow you to borrow 100% of the purchase price of the new property).

Which lenders are right for your situation? Most lenders have a specialist area. For example, specific lenders have more experience with providing bridging loans for residential homes; others are adept at funding larger corporate projects.

 

Choosing the right provider 

The first place people may begin looking is online comparison sites. Not all providers are listed on price comparison websites and they may not cater for customers with tricky or complex situations. Bridging Finance is a specialist area and it is always best to take advice from an expert in this field. Friends Capital will consider all client’s situations, even if they have poor credit or need to borrow a higher loan to value.  

Comparison sites also remove the personal touch. If you are trying to get a loan for a home purchase, the process of deciding on and comparing bridging loans can feel very personal. Sometimes having direct contact with your bridging loan broker can be invaluable. Friends Capital will give you personal advice and tailor the terms of your loan specifically to you. 

Some people choose to make financial decisions on things like bridging loans by talking to friends or family members. It can be comforting to work with someone who is recommended, so don’t be afraid to seek recommendations from people you trust for expert financial support.

Contact us for answers to your bridging loan questions or to apply for a bridging loan quote today.

Bridging Loan Rates Explained

What are bridging loan rates?

For those new to the term, bridging loans (also known as bridging finance) help you to literally ‘bridge the gap’ between times when finance isn’t readily available. Taking out a bridging loan can be a fantastic option for those who are, for example, looking to buy their dream home and can’t wait until their current home has sold. In many situations, bridging loans can be a lifesaver.

Interest rates are higher than standard loans and mortgages because they are a short-term loan instead of a long-term one. Fortunately for many, the rates at which bridging loans cost borrowers is lower than ever due to stiff competition among lenders.

How are bridging loan rates calculated?

Many factors affect the kind of bridge loan rates you could get from a lender. We’ve tried to include them all below. Lenders look at the loan compared to the value of the security you give (e.g. the value, condition and location of the house), your credit history and the overall return they will receive.

The ‘loan to value’ (LTV) is especially important. If you want to take out a bridging loan for a house purchase, the loan will be calculated against the value of a property you currently own and the property you are buying. Some lenders will not give a bridge loan for a property that is in a poor state of repair, those that will are likely to charge a higher premium for it.

Poor credit history or a lower-income will not necessarily exclude applicants from being granted a bridging loan. All lenders offer the opportunity for interest to rolled up and repaid when the loan is redeemed, which is helpful for bad credit bridging loans. This is an excellent option for people who need money to make improvements to a property, which will increase the sale value of the home.

When are bridging loans due to be paid back?

From the time you first seek to take out the loan, you should know when you are going to pay it back. If paying back your bridge loan depends on the sale of a property, then you must be aware of some factors. These include (but are not limited to) how long the marketing process will take, evidence of reasonable end value, the existence of potential buyers and how quickly the sale process will take place.

Some bridging loans require the payment of interest monthly, with the remainder of the loan paid at the end. Other bridge loans add interest onto the final loan, with the initial loan plus the interest payable at the end.

Contact one of our financial experts today, we are happy to provide you with answers to all of your questions and suggest the best product to suit your situation.

Bridging loan case studies

Here you can find examples of how bridging loans have helped customers move into their dream home without having to reduce the value of their current property.

Bridging loan case Study 1

Mr & Mrs H were both over 60 & retired. Due to their age & pension incomes, a traditional purchase mortgage wouldn’t be available.

Their house was on the market for £900k (with no mortgage outstanding) & had been for a couple of months. They saw the perfect downsizing property on the market for £600k and had savings of £100k to put towards the purchase.  We at Friends Capital,  agreed to a bridging loan of £500k to secure the purchase, thus avoiding the need to reduce the price to enable a quick sale.


Bridging loan case Study 2

Mr N was due to move into a new-build property last week but his buyer`s chain fell through.

He was under pressure from the developers to complete the deal, as this was the second property chain-break and they had other interested buyers. With a new-build property price of £450k, his current house sale agreed at £300k (with a small balance left on his mortgage) and with savings to use we arranged a bridging loan quote for £200k within an hour & a decision in principle the same day, funds were released to complete the chain within 10 working days.


Contact us today to discover how our bridging loans can help you do the same.

Bridging Loan Application Form

Property Chains In A Nutshell

What Is A Property Chain?

You may have heard the term, but thought it sounded more complicated than it is. It is, quite simply, a sequence of linked houses. Each homeowner relies on the person buying their house to release funds for them to buy their next home. If their house sale does not go through, then they will be unable to purchase the next one. As you can see, this creates a chain where one break could cause many others not to be able to go forth with their purchase. So, someone could affect a property exchange of someone that isn’t even in the country. 

 

Why Do Property Sales Take So Long To Complete?

With so many moving parts and so many people needing to take action, it is easy to see why the chain model can create a lot of delay and confusion. Apart from the paperwork, people can also change their minds or struggle to make a final decision at all. Potential problems can arise, such as structural issues brought up by the property survey, which can lead to buyers pulling out and breaking the whole chain. The lack of transparency between different parties in the chain also makes it difficult for the others involved to know what is going on.

Naturally, chain free properties are much more accessible, and the exchange is usually much faster. 

 

Why Do So Many Property Chains Break?

Chains can fail for many reasons. Some include people losing their jobs, not being given the right mortgage or even changing their mind. If you consider all the various steps that are required to go right to complete on a house purchase, it is easy to see why 1 in 3 property purchases fail. 

First, the mortgage must be agreed in principle. Then, an offer needs to made and accepted where the property is sold subject to contract. Solicitors must be arranged both sides to mediate the purchase and surveyors will conduct various evaluations. The mortgage must then be finalised, contracts exchanged, and finally, the property is completed. 

Any hiccup along this long and tenuous process, requiring agreement from different professionals agree from both sides, puts the completion of a property in jeopardy. 

 

Can A Bridging Loan Be The Solution?

Bridging loans, are a type of loan, typically large in value, that can prevent the failure of a property purchase. Bridging loans are a great option if the buyer of your property pulls out of the deal, a bridging loan can cover the cost of your desired property. They are ideal for those who have equity in a property, but no income, so are less eligible for a mortgage. The money is available in 1-2 weeks and prevents the seller from losing money by reducing the housing price in return for a quick sale. 

Bridging loans are usually paid back in 12 months. The lender receives the interest from the loan, and the buyer gets the house that they had their heart set on. The interest from the bridging loan repayments are not due until the sale of your property has gone through. The loans acts as an emergency bandage on the lost buyer, helping everybody in the chain carry on as usual.  

Contact us today and discover how a bridging loan can help you.

 


Case Study 1

Mr & Mrs H were both over 60 & retired. Due to their age & pension incomes, a traditional purchase mortgage wouldn’t be available.

Their house was on the market for £900k (with no mortgage outstanding) & had been for a couple of months. They saw the perfect downsizing property on the market for £600k and had savings of £100k to put towards the purchase.  We at Friends Capital,  agreed to a bridging loan of £500k to secure the purchase, thus avoiding the need to reduce the price to enable a quick sale.

See more case studies here…


Bridging Loan Application Form

How the Coronavirus Covid-19 pandemic is affecting the mortgage market

These are strange and worrying times for everyone, from where we were a year ago to today it isn’t easy to contemplate just how much our lives have changed.

No-one has escaped the change to our lifestyles and general day to day activity. This includes the financial services world and specifically our business of arranging mortgages for house purchases or raising capital for home improvements and even debt consolidation.

The mortgage demand

Now that we are fully back in our Covid secure office, we are seeing a pent-up demand for mortgages, including first-time buyers, Buy to let and bridging loans, which help clients keep hold of their dream home even when the property chain begins to breakdown.

Restricted lending

However, whilst the demand for mortgages remains high, the whole of market lending panel (including banks, building societies and specialist lenders) are struggling under workloads as their staff still work from home, and some are still on furlough. They have also tightened their lending criteria and are limiting lending to applicants with more deposit than pre-covid. Questions are also being asked with regards to furlough working, and how income has been affected for potential customers.

How we help you get a mortgage

The good news is that here at Friends Capital, we have a team of specialist mortgage advisers that are continually kept up to date with developments in the Mortgage world. While, we guarantee that we will be honest about the timescales and chances of a mortgage approval, given current circumstances, it is possible that a greater deposit may be required (15%+) in order to get a decision in principle.  In these situations, we will often advise you to re-apply once you are back on full pay with your employer or for those with a low credit rating, we would recommend waiting, as credit scores often increase with time. For those who may be struggling with payments and a bad credit rating, we are happy to provide a few tips on how you can manage finances and increase your credit score. 

We are an independent mortgage broker in Sheffield that operates nationwide and can accept confidential enquiries via phone, email or our secure customer portal.

Call me back Apply online