Whilst writing my blog, I often find myself coming back to the flexibility and innovation shown in the short-term lending sector – and yet again, recent products launched by several lenders continue to demonstrate this…
Last month, short-term bridging lender Alternative Bridging Corporation announced the launch of their ‘Revolver’ bridge, which offers borrowers the ability to draw-down, repay and then re-draw funds on a flexible bridging facility basis, with a term of either 24 or 36 months.
Flexible facilities used to be common place, but since the credit crunch, all lenders withdrew this type of facility, which were previously only traditionally offered by high street lenders and were usually linked to a bank account. This product is aimed at property professionals who are looking to make multiple investment purchases and therefore would benefit from an ongoing credit facility that they can dip in and out of as required, without the associated set-up costs of taking out a new bridging facility each time.
The product works best where there is a an unencumbered property asset that the lender can take a charge over, which remains in force for the whole two or three year period. After the loan has been repaid the first time, the charge remains, and when funds are not being utilised by the borrower, they pay a modest interest rate of just 0.25 per cent per month on any unused funds (equivalent of 3 per cent per year). As soon as funds are redrawn, the higher rate of bridging interest is charged, with rates starting from 0.85 per cent per month, up to a max of 1.25 per cent per month, depending on LTV and product selected.
Another big growth area in bridging is the refurbishment sector, as more and more lenders come up with specific products aimed specifically at suiting the needs of the property professional.
Bridging has always been suitable and utilised for investment property refurbishment, but not so long ago there were no specific products. Bridging lenders simply offered their standard first charge rate, second charge rate and would normally have a higher rate if any level of refurbishment was to be done to the property, whilst the loan was in force.
In the current climate, most bridging lenders offer a range of products, catering for both light and heavy refurb. One of the most recent lenders to add a refurb product to their offering is United Trust Bank. Their product is available up to 65 per cent LTV (max gross loan), but this can cover up to 100 per cent of the cost of the refurbishment works. Stage payments are also available, so funds can be drawn as and when required, which means that interest is only charged on the funds being utilised and not the whole loan facility. Standard light refurb is acceptable (replacement kitchens, bathrooms, internal works and typical structural works). This facility is only offered on non-regulated loans and to borrowers demonstrating adequate experience in the property refurb field. The rate is 0.95 per cent per month and there is a 2 per cent facility fee. There is also a minimum property value of £400,000 and a minimum loan size of £100,000. There are no ERCs.
Just two more examples of how the bridging sector continues to take stock of the market and the needs of borrowers to come up with products that work for them.