Benefits of a second charge bridging loan

An increasing number of people in need of extra funds are turning to second charge bridging loans to purchase investment properties, inject capital into businesses, or make refurbishments in order to prevent disturbing their existing attractive mortgages.

Demand for second charge lending is set to increase throughout the year. In a sustained low-interest rate environment, it now often makes more sense for a borrower to release equity on a property by taking out a second charge, rather than the prospect of refinancing away from their current deal.

A second charge bridging loan could be the ideal solution for those who already have a mortgage secured against their property but requires further funds for a short period of time.

Second charge bridging loans can be used for many reasons, such as purchasing an investment property, business expansion, and redevelopment of an existing property to name but a few.

What is a second charge bridging loan?

A second charge bridging loan sits behind an existing loan or mortgage. If there is enough equity left in the property to secure another loan against it, a second legal charge may be taken out.

A second legal charge can be secured on all property types, including buy-to-let, residential and commercial assets, and typically has a 12-month maturity, unlike a secured loan which is a form of longer-term financing.

As it sits behind a first charge loan, a second charge will always require consent from the first charge lender and is usually more expensive than a first charge, reflecting the additional risk taken by a finance provider.

When are second charge bridging loans beneficial?

  1. If you are on a low rate/interest-only mortgage

Using a second charge bridging loan means you keep your existing mortgage rate. There would be no changes to the existing mortgage terms and conditions. A second charge could allow for more flexible repayment terms, which could potentially save thousands of pounds in interest.

  2. If you’re locked into a fixed rate with early repayment charges

If you must pay a large penalty for stopping/switching your existing fixed rate mortgage early, a second charge loan may be cheaper as the existing mortgage stays in place and the penalty is not charged.  It would be beneficial to run a cost comparison in this scenario.

   3. You’re unable to secure further funds from your mainstream lender

Mortgage rules have become stricter in the past couple of years, with lenders applying tough ‘stress’ tests to make sure borrowers can meet repayments if interest rates rise.  However, second charge bridging loan providers don’t rely on the same tests and can tailor a solution to suit your individual borrowing needs. Second charge bridging loans are also particularly helpful for those with unusual income structures, such as the self-employed, or those with complex financial backgrounds.

4. You need the funds quickly

Where a mainstream bank may take several months to put together a loan for a borrower, a bridging finance company is often able to make lending decisions within hours of initial enquiry, so funds can be released quickly, sometimes even in less than a week. A second charge bridging loan can be a useful tool for those who simply need a rapid cash injection.

How much can you borrow?

You can borrow a maximum of 70% loan-to-value and loans can be arranged from £100k to £5m. The actual amount will depend on the available equity in the property and affordability of the loan.

How can MT Finance help?

At MT Finance, we believe a second charge bridging loan is about empowering borrowers to enable them to take advantage of time-sensitive opportunities that can make or save them money.

As an example, we helped a client who required £349,000 second charge loan on her £8.5m property. The client was part way through refurbishing her investment property, but the process had been delayed. She didn’t want to remortgage as she intended to sell the investment property as soon as the refurbishment works on it were complete and didn’t want to be penalised for early repayment.

In just 12 days, MT Finance provided a £349,000 million second charge bridging loan at 39% LTV. Interest was retained over 12 months, with no exit fees or early repayment charges. No personal guarantees were required.

Our second charge bridging loan gave her time to carry out the works and significantly increase the value of her investment property. The client will sell the investment asset to exit the bridging loan, against the higher value.

Second charge bridging loans will continue to offer significant financial savings for a wide range of borrowers, not just those who may struggle to obtain finance through traditional routes.

MT Finance is a multi-award-winning bridging finance lender and we have many years’ experience and know-how when it comes to second legal charges. We assess every single application for a second charge loan on a case by case basis, assessing each case on its own merits. Our flexible approach means we can structure your second charge bridging loan to your exact requirements and allows us to make quick decisions and deliver funds at speed. We also do not charge any exit fees or early repayment fees and do not have any lengthy and tedious application forms for you to fill out.

Our entire application process is quick and easy and with highly competitive interest rates and no upfront fees, we offer a fast, transparent, and stress-free service.

Contact us today by calling 0203 051 2331 or filling in our contact form. Our team are on hand to discuss your second charge bridging loan enquiry and will be happy to answer all your questions and allay any concerns. Please note that if the second charge loan is secured on a residential property, it must be for business use only.

2018 Bridging Trends revealed

Despite the turbulence in the financial markets, bridging finance displayed positive development in 2018 and maintained favourable liquidity, particularly in the second half of the year, according to the latest Bridging Trends data.

Bridging loan volume transacted by contributors hit £766.9 million in 2018, an increase of £232.8 million on the previous year. This is the highest annual gross lending figure to date and comes as four new contributors joined Bridging Trends in 2018: Clever Lending, Complete FS, Pure Commercial Finance, and Y3S.

The split between 1st and 2nd legal charge bridging loans remained consistent throughout 2018, with first charge loans accounting for 83% of the market in all four quarters. Second charges accounted for an average of 17% of total market volume in 2018 – the same average volume as in 2017. In 2016, 18% of bridging loans transacted by contributors were second charges.

A significant portion of bridging loan activity was unregulated in 2018, at an average of 64% of all transactions. Whilst regulated bridging loans decreased market share on previous years to an average of 36% in 2018, compared to 46% in 2017, 44% in 2016, and 37% in 2015.

Average loan-to-value levels increased in 2018 to an average of 55%, from 47% in 2017, and 49% in 2016. This could be attributed to higher LTVs being made available by new entrants in the space.

Average monthly interest rates continue to fall year on year, demonstrating how bridging finance has become cheaper. The average monthly interest rate in 2018 was 0.81%, lower than in 2017 (0.83%) and 2016 (0.85%).

Funding property refurbishments was the most popular reason for obtaining bridging finance in 2018, with the average proportion of loans advanced for property refurbishments increasing from 23% in 2017, to 28% in 2018.

Demand for bridging loans taken out for business purposes also increased in 2018, increasing on average from 12% in 2017, to 14% in 2018.

2018 was evidently a year where borrowers decided to opt for fast and flexible bridging loans to make improvements to properties and bolster yields, against the backdrop of Brexit uncertainty and legislation that has made it tougher to purchase new properties. Consequently, bridging loans for mortgage delays fell in every quarter in 2018.

The average loan term in 2018 was 11 months. down from 12 months in 2017. The average completion time of a bridging finance application averaged 45 days in 2018, up from 43 days in 2017. Average loan completion times were also 45 days for the year in 2016.

To view the Bridging Trends 2018 infographic, please visit www.bridgingtrends.com

Brokers confident for 2019

A majority of brokers are confident about the year ahead, according to our latest Broker Sentiment Survey with 42% of brokers predicting an improvement in market conditions in 2019.

Some 37% of the 113 brokers questioned believe overall market conditions will remain the same in 2019, whilst only 21% of brokers surveyed said market conditions would get worse this year. Almost three quarters (71%) of brokers surveyed said the impact of Brexit would be the main challenge for UK financial services firms in 2019, while 17% cited economic uncertainty, and 4% said lending restrictions would be the biggest challenge.

Despite these challenges, demand for specialist finance is expected to remain strong, with 82% of brokers preparing for a further rise in bridging finance volume in 2019.

In addition, 75% of those questioned reported an actual rise in bridging loan volume in 2018.

For the fourth consecutive quarter, funding a development project was the main reason borrowers took out bridging loans in the last quarter of 2018 at 33%, followed by property purchases at 29%. Whilst 13% of brokers said refurbishment was the most popular purpose for bridging finance in Q4 2018.

For the sixth consecutive quarter, the South East saw the biggest demand for bridging finance in the UK during the fourth quarter of 2018, at 54% — a 7% increase on Q3 2018.

The second highest area of demand was in the Midlands. Only 12% of brokers noted demand for bridging finance in London, down from 41% in the previous quarter.

To find out more, speak a member of our team on 0203 475 0176 or click here to fill out our quick enquiry form.

MT Finance secures £50m funding deal from Insight Investment

MT Finance Limited (“MTF”), an award-winning specialist short-term property lender, today announces the completion of new senior and mezzanine debt facilities to enhance its lending capabilities to the UK property finance market.

MTF has raised up to £50m of senior funding from funds managed by Insight Investment alongside mezzanine funding from an unnamed UK fund manager. These new lines further diversify the funding structure of the business that currently includes a £125m committed forward-flow arrangement with a Global Institutional Investment Manager, as well as almost £100m from a portfolio of High-Net-Worth individuals.

Established in 2008 by co-founders Joshua Elash and Tomer Aboody, MTF has quickly established its reputation for providing outstanding customer service and the ability to complete loans quickly. MTF has successfully completed in excess of £200m loans in the preceding 12 months and had a record month of originations in November.

MTF’s reputation in the market excels for delivering fit for purpose bridging loans at sensible rates, and its approach to lending is something that has been consistently recognised within the financial services industry, with the company winning various sector awards including “Best Service from A Bridging Finance Provider” in the 2018 Business Moneyfacts Awards.

Joshua Elash, co-founder, said, “MTF has assisted property professionals, business owners, and individuals with their finance requirements for the last 10 years. This additional funding will enable us to continue to provide leading, competitive, and relevant products to our clients into 2019 and beyond.”

Commenting on the transaction, Jeremy Deacon, Insight Investment added,

“Our Secured Finance strategy continues to seek compelling asset-backed structures that provide our clients with attractive risk-adjusted return while capturing the complexity/illiquidity premium on offer in the private ABS market. We have known Joshua and Tomer for the past few years and they have built an impressive bridging platform underpinned by good credit and service. We are pleased to support MTF on the next stage of their journey through the provision of scalable senior funding and look forward to a fruitful relationship over the next few years.”

MTF was advised by the Financial Services Corporate Finance team at EY.

Jordan Blakesley, Senior Manager, said, “We are delighted to have assisted MTF with the debt-raising process. The support demonstrates the strength of the underlying MTF platform and will enable the MTF team to act on the sizeable opportunities they are seeing in the market.”

Lee Doyle, Matthew Pentecost, and Elizabeth Street-Thompson from the banking team at Ashurst LLP provided legal advice to MTF.

Michael Lorraine, Kathryn James, and Annabel Rolls from the asset-backed finance team at Simmons & Simmons LLP provided legal advice to Insight Investment.

Property investors still optimistic despite Brexit negotiations

The ongoing Brexit negotiations have left the UK property market in a state of insecurity. This is reflected in the results from our latest Property Investor Survey, where almost half (43%) of respondents stated that the biggest challenge they currently face is the continued uncertainty surrounding Brexit. This is currently seen as a bigger challenge than lending restrictions at 28% and the recent changes to buy-to-let (BTL) legislation at 16%.

The standoff in the Brexit negotiations alongside the Bank of England Governor Mark Carney’s warning that property prices might drop by up to a third after a ‘no deal’ Brexit, has meant that property investors are being faced with the question of how Brexit might affect them.

With a reduction of tax relief shrinking buy-to-let profits, coupled with the introduction of a 3% stamp duty on second homes, property investors are now faced with higher costs which in effect has prompted the need to generate more income. However, due to the Brexit uncertainty many property investors and landlords are unsure if property prices will plateau or plummet and are therefore seeking alternative methods to maximise profits- by adding value to their properties through refurbishments, rather than purchase property as a straightforward portfolio investment. At mtf, we have certainly seen an increase in demand for funds to conduct bathroom and kitchen conversions, loft conversions and to convert properties into an HMO.

Gareth Lewis, mtf’s commercial director echoes the need for property investors to add value to their portfolios. ‘The uncertainty with Brexit means that property investors are not waiting for the government before they seek other options for their portfolios’ he said.

‘They are resilient and savvy, so they will be watching the negotiations closely whilst bolstering their investments and taking opportunities, to allow them to withstand such an economic change’ he adds.

Gareth remains optimistic about the market and believes it is still liquid despite the Brexit uncertainty. ‘There are still lots of opportunities for property investors such as the demand for HMOs due to the rising population in the UK. Investors have therefore changed tact and rather than buying lots of properties that are ready to be let, are doing heavy refurbishments to attract renters or add values to their portfolios’ he said. ‘As we all know, there is still demand houses so as long as that demand remains, property investors will be willing to service the market’ he added.

‘The results from the survey shows that 80% of those affected by the new HMO rules are not willing to sell their portfolio. This reinforces my point that these landlords are looking to hold onto their portfolios and the property market is not experiencing a mass exodus despite regulatory changes or Brexit’ Lewis said.

According to Gareth, the uses of bridging finance has also changed to go with the trend. ‘A lot of the new cases that have come through to us recently are mainly for either refurbishment or using bridging to inject cash to the investor’s businesses. This shows the flexibility of bridging finance as a tool for property investors to service their needs whilst offering competitive rates and access to funds quickly’’ he said.
Bridging finance remains a good source of funding for investors with interest rates starting from 0.75%. ‘At mtf especially, our loans are flexible, offering the landlords peace of mind. We also do not have any early exit fees, so they are free to repay the loan whenever they want’ he added.

Gareth has also seen investors choosing to get funds released in stages to first bolster their property’s value through the refurbishment phase, and later withdraw further funds for further property transactions whilst they wait for the sale of the existing project.

‘The Brexit negotiation process will remain in the thoughts of investors and businesses alike. However, bridging finance enables landlords and investors alike to have access to funding in times such as these, allowing them to continue to thrive and take opportunities as they arise’ he added.

To find out more, speak a member of our team on 0203 475 0176 or click here to fill out our quick enquiry form.

james-anderson

How we make bridging finance effortless for our clients

For a client using bridging finance, certainty and fast access to funds are always at the forefront of their expectations. This is because, by its very nature, bridging finance should be fast and flexible compared to traditional funding methods, such as mortgages.

At mtf, we have not lost sight of this at a time when other lenders are moving on to computer banking models and lengthy application processes.

It is important to us that our brokers, introducers, and clients know they are dealing with people and not a corporation. Therefore, we go to great lengths to ensure that we deliver an open, communicative, and transparent service, and take the time to listen and fully consider each application. From start to finish there is direct dialogue with a decision maker who has the ability to make executive, pragmatic decisions and to drive a case home to completion.

We have built our underwriting process around a simple idea; the value of a property and the rationale of a loan are the most relevant criteria when assessing any bridging finance application.

As speed is such a vital element of bridging finance it’s important that all parties involved move swiftly because if they cannot complete to the borrower’s schedule, the client could miss out on an opportunity. Therefore, mtf has its own legal underwriting team who is responsible for driving the legal process. We feel by having a dedicated team, working in tandem with external lawyers, mtf significantly reduces any chance of delay or misunderstanding.

mtf is committed to building strong relationships. We have never over promised or under delivered because we don’t want to let our brokers or clients down. We always make sure we are continuously working hard to meet requirements.

In a recent example, a client wanted to purchase an investment property and required funds within a fortnight. The client was in Jamaica at the time and due to other commitments, was unable to come back to the UK in time to verify their identification documents. Time was fast running out for the client as he was about to lose an investment purchase.

So, we decided that I would fly out to Jamaica to meet the client, verify his ID, and witness the signing of the legal documents. I immediately flew back with all the signed documents allowing us to proceed with the loan. The client was then able to purchase the investment property with the funds from mtf with days to spare.

It’s important to note that this was for a £150,000 loan, not that of a million pounds plus, demonstrating how mtf will go the extra mile for the client, regardless of the loan amount requested.

Most lenders promise a great and fast service. At mtf, we understand that a promise is only good when it is delivered. We have built the company’s reputation around a strong service proposition, by being open and communicative and running an efficient operation. We are grateful to have received multiple industry awards in recognition of our approach to lending and the exceptional service we consistently deliver.

Enquire for bridging finance today.

Regulated bridging slows to lowest level since Q1 2015

Regulated bridging loans fell in the third quarter to the lowest level since Q1 2015, according to the latest Bridging Trends data.

The number of regulated loans conducted by Bridging Trends contributors fell for the second consecutive quarter, to 31.6% of all lending in Q3 2018, compared to 36.8% during Q2 2018.

This is the lowest level since Q1 2015, when the number of regulated bridging loans transacted was at 31.5% of all lending.

Bridging loan volume transacted by contributors hit £213.35 million in Q3 2018, an increase of £15.4 million in the previous quarter. This is the highest figure to date and comes as another new contributor joins Bridging Trends- specialist finance packager, Clever Lending.

First legal charge lending increased to 84.4% of all bridging loans during Q3 2018, up from 80.9% in the second quarter. Meanwhile, second charge loans decreased to 15.6% compared to 19.1% during Q2 2018.

For the second consecutive quarter, refurbishment purposes were the most popular reason for obtaining a bridging loan, as borrowers continued to add value to existing and newly purchased properties.

Mortgage delays were the second most popular reason for obtaining a bridging loan, accounting for 19% of all lending, down from 20% in the previous quarter.  Whilst loans for auction purchases and business purposes increased in the third quarter by 3% and 1% respectively.

The average monthly interest rate dropped to 0.78% in Q3, from 0.83% in Q2 2018- the lowest rate recorded since Q4 2016. This activity translated into lower LTVs, with average LTV levels in Q3 decreasing by 1.5% to 55.4%.

The average completion time on a bridging loan application jumped to 46 days during the third quarter from 43 during the second quarter, as service and resource levels were impacted by annual leave.

The average term of a bridging loan in the third quarter remained at 11 months.

 

 

Half of brokers see rise in bridging loan volume

Demand for bridging finance grew in the third quarter of 2018, with almost half (48%) of brokers experiencing a rise in bridging loan volume, up from 38% in the second quarter of 2018, according to our latest Broker Sentiment Survey.

A mere 17% of brokers did not experience a rise in bridging loan volume in Q3 2018.

 

Feedback from brokers points to a strong need for specialist lending. However, the geographical spread of bridging loan demand narrowed in the third quarter the year, with demand in the North West, South West, and Scotland dropping off from the previous quarter. The South East saw the biggest demand for bridging loans in the UK at 48%, up from 30% in Q2. The second highest area of demand was London, at 41%.

 

For the third consecutive quarter, funding development projects was the most popular reason for taking out a bridging loan at 31%. Business purposes was the second most popular reason at 21%, up from 16% in the second quarter of 2018.

 

However, two thirds (66%) of brokers said the bridging loan process is longer than it was 12 months ago.

 

With the majority (48%) suggesting 3-4 weeks was the average length to complete a bridging loan. While 21% indicated that bridging loan cases generally took 2-3 weeks to complete.

61% of the 113 brokers surveyed blamed solicitors as the main reason for delays, followed by the valuer at 16%.

Need for Speed

The bridging finance industry is in promising shape and demand continues to grow, particularly from property investors looking to fund development projects in London and the South East.

However, speed has always been a vital element in bridging finance and it is essential we don’t lose sight of this. It is important that all parties involved- the lender, lawyer, valuer, and the broker, move swiftly to complete to the borrower’s schedule.

It is important we stay true to the fundamentals of bridging: providing borrowers with fast access to the capital they need in a responsible and sustainable way and not fall into the more traditional computer banking model.

At mtf, we are always looking at ways to make enhancements to our processes in order to minimise transaction delays. For example, we have a team of in-house legal underwriters. This approach makes our process faster and much more efficient. The team all come from a legal background and because they each understand the legal principles of a bridging loan application, can mitigate risk as they have the knowledge and expertise to flag certain points to the attention of our solicitors. Their expertise also allows mtf to take a commercial view on certain matters, so our solicitors aren’t bogged down unnecessarily- this really speeds up the process.

For more information, or if you have an enquiry you wish to discuss, please don’t hesitate to contact the team on 0203 051 2331.

Funding business expansion in just 12 days

There have been a number of challenges for business in 2018. From economic pressures and ongoing Brexit negotiations to rising interest rates- all of which are set to create further challenges for the SME community in one way or another.

Access to finance, however, continues to be a critical challenge for UK small businesses. There is an ongoing lack of flexibility and for companies trying to react quickly to the new challenges in the market, that makes it hard for them to seize new opportunities.

Small business owners need a wider, more versatile pool of liquidity to draw from that is tailored to meet their needs. One major source of capital available and willing to fund the SME space is bridging finance.

Case in point

As an example, mtf recently completed a bridging loan for clients who were looking to raise funds to invest in their growing retail business.

On the strength of the cash flow from their first retail premises, the clients had been able to obtain a commercial mortgage for a second location. However, an opportunity had suddenly come up to purchase the premises next door. To achieve faster growth, the clients wanted to purchase both premises- expanding their storefront, as well as purchase stock for the new, larger store.

The sellers had a specific completion date which meant the clients needed to move quickly to take advantage of the opportunity and were unable to obtain a commercial mortgage in the time-frame required.

Faced with roughly a fortnight to complete the purchase, the clients needed to act quickly. As time was of the essence, they were immediately introduced to us by one of our long-standing brokers.

On receipt of the enquiry, mtf was able to give an immediate decision, and we issued the offer of loan that day. The clients needed 100% of purchase price, so released equity in their principal residence by way of a second charge to increase funding.

Given that the commercial property and the residential property now needed to be valued, it was imperative that the valuation was undertaken as soon as possible. Therefore, we instructed the valuation at the same time as going to offer. Our team then worked around the clock to ensure all the legal requirements were addressed to ensure everything was ready to be sent to our lawyers as soon the valuation report came in.

In just 12 days, mtf provided a £450,000 bridging loan spread over both assets at 65% LTV, based on the open market value of both assets. Interest was retained at 0.95% per month, over a 12-month term, with no exit fees or ERCs. No personal guarantees were required.

Our loan meant the clients were able to purchase the property by the proposed completion date- capitalising on a fantastic investment for their business. What’s more, the 12-month term gave them plenty of time to pay for the initial operating costs and purchase additional stock. The clients would then work with their broker on the exit by refinancing on the main residence and by taking out a commercial mortgage on the new premises.

The client’s broker later commented:

“This case was difficult initially as the clients had tried to secure their own funding before coming to me. With such a short deadline in which to complete the purchase, I knew I had to place the case with a lender that could perform. mtf was the obvious choice here and whilst the clients had themselves received indicative terms from other lenders at lower rates, I carefully explained that there were aspects of the case that many other lenders would not have understood which would be relevant to this case.

“It was the combination of good advice and robust performance from mtf which made the deal happen with days to spare. The new shop is now open, and we are working through the exit for the clients now.”

mtf’s bridging loan products are designed to meet the many diverse needs of business owners. As a non-status lender, we do not require evidence of trading history, accounts or proof of income, and do not require personal guarantees. This allows us to take a practical, common sense approach to lending.

To find out more, speak a member of our team on 0203 051 2331 or click here to fill out our quick enquiry form.

Looking to add value to your portfolio?

With mainstream lenders implementing tougher restrictions, it has been harder for landlords and investors to obtain a buy-to-let mortgage, faced with more hoops to jump through in a time-consuming process. This can hinder those requiring fast access to funds.

Furthermore, for those looking to buy properties in need of major refurbishment, the difficulty in accessing mortgages from high street banks has intensified, as banks are less likely to lend on uninhabitable properties.

Bridging finance has been able to fill this void, gifting investors the ability to make necessary renovations to enhance the value of their properties, by providing funds with speed and agility.

One of the most obvious advantages of a bridging loan is the speed at which funds can be delivered.london-zoom

Whether you’re looking to generate more rental income or add value to your portfolio, mtf is here to get your bridging loan completed in a matter of days, preventing you from either missing out on an opportunity or leaving a property sitting in your portfolio without generating returns while you wait for financing from a long-term lender.

As an example, we were recently approached by clients looking to raise funds to complete refurbishment works on two properties in their portfolio. They were unable to get a mortgage from a mainstream lender as the properties weren’t lettable in their current condition.

In just 11 days, mtf provided a £162,500 second charge bridging loan over their main residence, at 65% LTV. Interest was retained over a 6-month term, with no exit fees or early repayment charges. No personal guarantees were required.

Our bridging loan gave our clients the funds they needed to carry out the works in order to significantly increase the value of the investment properties. They then refinanced the properties with a long-term buy-to-let mortgage from a bank to exit the bridging loan against a higher value.

mtf is a non-status lender, therefore, we will take a view on CCJs, defaults, and arrears and we do not require evidence of credit history, accounts or proof of income- instead, we focus on the property and your future plans.

For many investors and developers, the difference between success and failure is being able to finance a project, a bridging loan could provide solutions and turn your aspirations into achievement.

Key product features:scaffolding

  • Rates from 0.75%
  • Loans from £100k- £10m
  • Up to 70% LTV
  • Terms from 3-24 months
  • BTL, commercial, HMOs & mixed-use assets
  • Adverse credit, CCJs, and arrears considered
  • No exit fees/ No Early Repayment Charges
  • No personal guarantees required
  • No credit scoring

To find out more, speak a member of our team on 0203 051 2331 or click here to fill out our quick enquiry form.