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Bad credit and bridging loans

Bridging loans are a desirable financial solution under many scenarios. Because of this, even people with bad credit may want to make use of a bridging loan.

Can I get a bridging loan with bad credit?

Yes/possibly – There may be times when you are unable to keep up with your financial responsibilities. You may be unable to make payments on loans and other debts for many reasons. You may have become ill or lost your job; not paying is not always intentional.

Whatever the circumstances, if you have had problems in the past, it can affect your credit history. If you have bad credit or poor credit history, it doesn’t necessarily mean you will be turned down for a bridging loan. It may be more challenging to get approval for some types of credit, but others may be possible.

Check your credit report

Make sure you actually have bad or poor credit – sometimes people miss a payment or two and assume they have poor credit this isn’t always the case. FriendsCapital has partnered up with checkmyfile – the UK’s only multi-agency credit report – check your credit report.

What is a bridging loan?

A bridging loan is, as the name suggests, is a type of finance that bridges the gap. It is typically a finance option when buying a house. If you haven’t sold your home but want to complete on a new one, a bridging loan is an answer.

Read more on Bridging Finance here 

These types of short-term loans can be useful if you want to renovate your house before selling it. You may also want to have a bridging loan in place if you are buying property at auction. It is usually a short-term loan of 12 months or less. A bridging loan is paid off when you sell your house. When you take out this type of loan, it will need security, usually a property.

Applying for a bridging loan with bad credit

Even if you have bad credit, you can still get the loans you need. Many lenders are willing to work with you so you can find the right finance solution. Applying for a bad or poor credit bridging loan will require a specialist lender. An expert advisor will be able to look at suitable loan companies for you.

When applying for the bridging loan, you should:

  • Be honest about any issues with your past credit 
  • Provide all the necessary documentation
  • Have property for security

The financial expert will be able to explain all of the documents you will need to complete an application. Having an honest discussion about your previous credit problems is vital. It allows the advisor to choose the right financial lender. They will know which lenders specialise in providing financial products to people with bad credit.

You will have to think about when and how the loan is going to be repaid. If you are using your current house to satisfy the credit, then selling it at the right price will ensure a quicker sale. The bridging loan is either a closed or open loan. A closed bridging loan has a set completion date. An open-bridge loan won’t have a set date for you to pay it off. How you intend to complete the loan requirements will dictate the type of loan you get.

A bridging loan company may consider other assets if you have them. You may be able to use business equipment or items of high value. The advisor will be able to discuss any options for securing the loan with you.

Why a bridging loan is possible with bad credit

When you take a mortgage or other types of credit, your credit history is a vital source of information. The financial institution uses your credit history as an indication of possible payment issues. A mortgage lender needs to know you will pay for the whole term of the mortgage agreement. A bad credit report may give them cause for concern, and you may not get a mortgage.

A bridging loan focuses on the value of the security you are using. The bridging loan application process involves getting a valuation for the security property. As long as your property is valuable enough to cover the loan you are applying for, a lender may give you a bridging loan.

Because bridging loans are this way, the company tends to look more at the value of the property than the credit history. Some big banks or financial companies may not want to risk this type of loan if you have bad credit. It is essential to find the right company, and a financial expert will be able to do this.

Apply Now

If you think a bridging loan is what you need, we can help. We work with many different lenders and can find the right one for you. Specialist loan companies and banks will offer people with bad credit a loan. If you want to apply for a bad credit bridging loan, talk to Friends Capital today.

Becoming a UK landlord

At Friends Capital, we help UK landlords with buy-to-let mortgages every day. There are millions of privately rented houses in the UK, and with demand being higher than supply, more and more people are becoming landlords. With reduced savings rates, renting a property is seen by many as an excellent opportunity to create a passive income.

To become a residential landlord, you may be considering renting out your own home or buying a property to let. It is essential to understand the steps to becoming a landlord, and you should recognise that being a landlord is a business.

You will have money coming in and going out, with expenses and profit. Property has almost always been seen as an excellent long-term investment, but there are no guarantees of success. It is a good idea to speak to someone who is a landlord, to get a better idea of if becoming a UK landlord is for you.

Landlord expenses

Renting isn’t just a buy and forget type of investment. It will take your time, and you might need to deal with issues such as maintenance and repairs, rent arrears, and sub-letting.

You can use a high street or online letting agent, and these will take on the responsibility of some of these tasks. It’s a good idea to create an emergency fund to cover unforeseen expenses. This can cover costs such as a boiler breakdown or periods of vacancy where you might have to cover expenses such as council tax.

Further landlord expenses will include:

  • A landlord license
  • Gas safety checks
  • Energy Performance Certificates
  • Mortgage payments (buy-to-let mortgages)
  • Agency fees
  • Advertising and marketing
  • Professional photos (typically covered if you use a high street agent)
  • Solicitor fees for creating a tenancy contract

While most landlords avoid providing furnishings, most tenants expect you to provide white goods such as a cooker, fridge, freezer, and washing machine.

It is worth considering paying for a membership to a landlord association. The largest of these in the UK is the National Landlord Association. The perks are worth the fee and include:

  • Access to training events
  • Lawyer approved tenancy agreements
  • Discounted trade magazines
  • Advice from professionals
  • Access to networking events and online forums
  • Tenant referencing 

Tenant referencing with the National Landlord Association includes express and comprehensive tenant checks including previous evictions, current debts, credit history, criminal record, and a public record showing if tenants are being sued for unpaid rent or child support.

Do you need a buy-to-let mortgage?

If you have a residential mortgage for your property, then you need to check if you are permitted to rent? You will need to send a consent to rent application or change your mortgage to a suitable buy-to-let mortgage. Leasehold properties may not allow sub-letting, and this can be the case for properties purchased through a shared ownership scheme.

UK Landlord legal responsibilities

Your legal responsibilities as a landlord differ for properties in England, Scotland, Wales, and Northern Ireland. This is also the case for single-let properties and houses of multiple occupations.

Firstly, you should set yourself up as a business owner and register for a self-assessment with HMRC. You will need to apply for a landlord license and renew this every three or five years.

Your property needs to be fit for human habitation and might need renovating to lift it up to these standards. There are 29 hazards to consider, and these are laid out in the Housing, Health, and Safety Regulations 2005. Building stability, damp problems, ventilation, the amount of natural light, and electrical safety all fall within this legislation. You should also make sure that you fit a smoke and carbon monoxide alarm on every floor.

If you take a security deposit from your tenants, then these must be placed in a Tenancy Deposit Protection Scheme

As a landlord, it is your responsibility to ensure your tenant has a legal right to live and rent in the UK. EU citizens automatically have this right, although this may change after Brexit.

Landlords must conform to The Equality Act 2010, and this covers unlawful discrimination against race, religion, disability, sex, sexuality, and gender reassignment. You should also give 24 hours notice if you want to visit the property.

In summary

There is a clearly a checklist of tasks you must complete if you intend to become a landlord. However, the opportunity to create an additional income exists, and with a little preparedness, you can begin a successful venture as a UK landlord.

Guide to buying a property

Buying a property can be a painstaking and complicated process, especially if you’re a first-time buyer or inexperienced on the market. However, even for someone who’s been through the process of purchasing a property, it can be a stressful situation trying to get the best deal when buying.

Here, we’ll detail how you can get the best deal when you’re buying a property – covering everything from viewing, submitting an offer and moving in.

What to do before viewing a property?

Getting a good deal on a property comes down to every part of the buying process, even as early as when you are keeping an eye out for potential places of interest. Here’s how you can get yourself off on the best foot to get the best deal on a property.

Know your budget

Considering the cost of a prospective property against your budget is key. Understanding your limits can save you lots of time.

Often prospective buyers have a budget range, for example, £200’000 – £250’000, having this information is critical when it comes to negotiations.

Friends Capital tip “If you like the property, but the asking price is outside of your budget, it might be worth contacting the estate agent to see if there’s some ‘wiggle room’ with the price. If not, move on – don’t try and spend more than you can afford!” 

 

Know what you want

It seems obvious, but plenty of buyers don’t know what they want when looking for a property. Considering everything upfront can save you lots of time.

What is important to you in a property. Common requirements include;

  • A specific number of bedrooms
  • Good access to public transport
  • School catchment area
  • Off-road parking

A good tip is making a list of ‘must-haves’ and ‘would-likes’ when finding properties. Then compare the ones you’ve found to highlight the best-looking deals.

Get your mortgage in place

Perhaps the most important part of the process is getting your mortgage in-place, of course you won’t be ready to complete yet but you can get an AIP (agreement in principle). An AIP essentially means the lender has confirmed they are prepared to lend to you – so if you find the right property you go ahead!

Friends Capital can help you get an agreement in principle. We are independent and have access to the whole of the market. Contact us for more information. 

The role of an estate agent

You’ll almost certainly be dealing with an estate agent of some kind when buying a property, and it’s important to know that their role is one of a ‘middle man’.

Ultimately they want to a deal that is suitable for you and the seller but a higher buy price is always better – happier seller and happier estate agent, so be careful with what you say.

Personal circumstances are exactly that, personal. Sharing details such as “I need a quick completion” or “this house is the only one that has everything we need.” put the power in the hands of the seller, so be careful. 

Tips for viewing a property

Keep an eye out and ask questions

It can be very easy to get swept up in the process of buying a property, especially if you’re viewing a property you really like. Keep an eye out and ask any many questions as you want, at the end of the day that is the job or the expectation of the person showing you the property.

On the flip side of sharing your circumstances, knowing the seller’s reasons for selling the property can be very important. For instance, if the property is in a chain, then they may need a quick sale which can aid your negotiations. 

Keep your cool

It can be exciting when viewing a property you’ve fallen in love with, and of course, it’s perfectly normal to worry about someone else coming in and making an offer better than yours. But remember to keep calm when viewing a property to keep the estate agent or owner guessing about your thoughts.

If you come across too keen, then the agent or owner will feel that they can get a higher bid out of you. 

Knock on doors and do your research

Asking questions to the seller is essential, but remember they want a sale – so will paint everything in the best light possible when answering. 

Try knocking on doors nearby to get a gauge on the area and your potential neighbours. You might find out that there have been previous problems with the area or the property which the seller may not willingly reveal unless asked directly.

You can use any information you get to get the best deal when buying a property. 

How to negotiate the best deal when buying a property?

Set limits on bids

Getting the best deal on a property is heavily influenced by the bidding process.

It’s best to limit yourself to a maximum bid, after which you agree with yourself to walk away. You never know, if you hit this mark, the seller may only be playing hard-ball to try and get more money out of you.

If this happens, they could well get back in touch to re-negotiate, that puts you as a buyer in a powerful position as it shows their hand in trying to get a sale.

Prove your willingness to complete

You can often convince a seller to accept a slightly lower if you can show you’re willing to get the deal done quickly. You can do this by ensuring you’ve handled all the details and have all your paperwork sorted. What’s more, it doesn’t lessen your bargaining position either as these kinds of details aren’t relevant to a specific property, it just shows you could move for another property at a pace too. 

Your AIP is highly relevant at this stage as it shows you have an amount waiting with the bank and can proceed.

Make your first bid low

It goes without saying; you should never make your highest bid first.

Rarely will a low bid be so derisory that it puts the seller of you entirely – a seller often understands that you’ll be starting with a low offer first and that you’re likely to meet in the middle.

Of course, take care with offers and make sure they are reasonable. Offering £150,000 for a £200,000 property is unlikely to sit well with anyone involved.

Discuss any issues with your solicitor

If anything awry pops up with your solicitor’s checks on a property you’ve had an offer accepted for, be sure to discuss this at length with the parties involved.

If it’s a deal-breaking problem, always be willing to pull out to avoid future costs. But if it’s something less severe, you can use this to re-negotiate to a price which reflects the issue.

Problems can range massively, so be sure to get an expert legal opinion on anything which raises eyebrows.

Friends Capital are here to help! Our team has vast experience helping our clients buying a property – get in touch!

Good luck with your search and we hope you find your dream home. 

Remortgaging – is it a good idea?

Remortgaging means switching your mortgage to a new lender or arranging a new mortgage rate with your current lender.

At Friends Capital, we find most people fit into one or more of the following scenarios, which one are you?

My current mortgage term is about to expire

Lots of lenders will only offer a fixed-rate mortgage for a set number of years – usually five or less. After this, they’ll move you onto their Standard Variable Rate mortgage, which is twice as expensive on average. The move to the SVR mortgage will happen automatically so be prepared to switch, or you’ll be paying more money!

I need to borrow money

Remortgaging to release equity in your property can get you a large lump sum. You can then use this money for other purposes; common reasons include home improvements, consolidating other debts or a new car purchase. Borrowing more money will increase your debt and monthly repayments so please make sure you check your affordability. 

Just like a first-time buyer mortgage, a remortgage can be rejected. Are you concerned your application might be declined? Contact Friends Capital, and we can advise you. 

I want to spend less each month

Paying less each month and switching to a cheaper rate is the most common reason. Finding a lower rate will reduce your monthly payments and leave you with more disposable income. Be careful remortgaging too early as some lenders will have an early repayment charge. 

Explore your options. Check out more information on remortgaging.

I want to pay my mortgage off quicker

Remortgaging is an excellent way of getting your current deal to match your circumstances. If you have more disposable income then when you initially took out your mortgage, you may decide to reduce the mortgage term and pay it off quicker. Alternatively, you make require a flexible mortgage that allows you to overpay each month. However, not all mortgages allow you to do this; lenders want you as a customer for as long as possible so blocking overpayments is an efficient way of doing that. A remortgage customer is a desirable customer type, especially to a new lender, so it’s your chance to negotiate and get terms that suit you.

Next steps to getting remortgage ready:

  1. Get an estimated realistic valuation of your property
  2. Work out how much is left on your current mortgage
  3. Look at when your current mortgage deal is due to expire
  4. Talk to Friends Capital and get the best deal possible.
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