In the current volatile economic climate, concerns over soaring energy prices, higher borrowing costs and the rising cost of living is affecting thousands of homeowners up and down the country. Faced with higher monthly repayments on their mortgages, utilities and groceries, the disposable income of many UK households is rapidly diminishing.
For brokers dealing with clients faced with escalating living costs, sourcing the right lending finance solution has never been more important. The days of low interest rates are over and it is here that the value of advice now comes into its own.
Brokers, more than ever, must ensure they leave no stone unturned when it comes to helping clients with their borrowing needs. This is particularly true in the second charge bridging market, which has been catering to the needs of clients that fall outside the parameters of mainstream lending for decades.
For those looking to quickly raise capital, a second charge bridging loan can provide fast finance for a short period of time, typically between three to 24 months. Borrowers can tap into the equity sitting in an existing property or properties within a portfolio by taking out a bridging loan against the property or properties before exiting the loan by refinancing onto a longer-term second charge term mortgage or by selling a property to pay back the loan.
One of the key advantages of taking out a second charge bridging loan is the speed at which the funds can be released. The use of AVMs means lenders receive a valuation at the point of sale, which helps to speed up the application process significantly. This means that deals can often be completed and funds released within days of the application being submitted, making them more attractive than remortgaging in terms of gaining swift access to finance.
Second charge bridging loans can be taken out by any borrower looking to quickly raise capital, as long as they have an exit strategy. It can be a useful financing solution in cases where the borrower is looking to refurbish an uninhabitable or below market value property where they are unable to secure a mainstream mortgage until such time the property is habitable or owned.
One of the main advantages of a second charge bridging loan is that it enables the borrower to retain the preferential first charge rate and avoid paying any early repayment charges on existing borrowing. Applications from both individuals and limited companies are accepted and loan amounts start from £25,000 to £250,000 with LTVs of up to 75% available.
Given the challenges facing many borrowers in the current economic climate, a second charge bridging loan could prove to be a useful way to quickly arrange finance for those facing unexpected costs and needing to capital raise or those that need to move quickly to avoid the loss of an opportunity.
Admittedly, this type of financing is less well known in the market than other forms of borrowing, but in cases where the borrower fail to meet the lending criteria of mainstream providers, a second charge bridging loan can prove to be an extremely versatile financing option.
Brokers with clients in need of specialist financing solutions but unfamiliar with the second charge bridging loan market, should ensure they speak to a lending specialist such as Mercantile Trust, whose expertise in the sector can help to provide the knowledge and advise required to ensure the borrowing needs of their clients are adequately met.
Maeve Ward is director of commercial operations at Mercantile Trust