I’ve mentioned a number of new lenders launching in to the Residential and Buy to Let sectors recently, and a number of new lenders are lining up for launch over the coming months. It is an exciting time, not just because rates are so low and activity is increasing, but because lenders are now looking at new market areas and criteria enhancements. One such lender recently launched in to the Buy to Let sector, and whereas the normal requirement is for customers to have two or three years self employed history, this lender has no minimum term requirement at all.
Whilst rates remain low, competition in the market will remain fierce and this changed approach has become apparent across all sectors of the market, including both Bridging and Commercial.
Bridging Finance (now also known as short term lending) is money to be used in the short term to facilitate a financial transaction which has either an urgent or short lifespan and which is primarily geared to a property transaction. The most regular type of transactions include: a property being purchased at auction: the purchase of a new property whilst the current one is still being sold – usually when downsizing: acquisition of a property which needs substantial renovation before it is suitable for a traditional mortgage or payment of an unexpected expense whilst more regular finance is being arranged.
There are a myriad of other reasons for which short term lending can be applied and each application is looked at on its own merits before a lender will agree to assist. The best way to look at this is as a means to an end. These lenders will need certainty on the exit route (how will they get their money back?) and they will always insist on an agreement being in place from a traditional mortgage lender to provide a mortgage, at a given time and once any requirements have been fulfilled. So, short term lending is designed to fulfil the need or desire to act quickly. We have seen funds drawn in 48 hours from application! Beware though, this type of lending and associated fees does not come cheaply and it makes sense to exhaust all other channels first!
Commercial loans tend to be looked at by specialist lenders, geared more towards high street premises/shop fronts, development opportunities, pubs, conversions from residential to multi use properties right up to multi-million pound office blocks and hotel complexes.