My mortgage lender will not lend on the property I want, can I get alternative finance?
I can’t move as my lender has turned down my property.
They say buying a house is one of the most stressful things you can do. Even when you have jumped through hoops at the mortgage lender and had you status approved you can be let down by the lender’s survey. With our expert advice on bridging loan tools we can get things moving quickly again!.
Traditional mortgage lenders place great emphasis on the collateral for the loan i.e. the property. The reason is if they need to repossess a property because of forfeiture of payment they need to know the property can be readily sold. In short, Mortgage lenders do not want to be landlords therefore they look for properties that can be moved into immediately should the mortgagor default. As such properties that need work to them just do not meet the traditional mortgage terms.
For Short Term Loan / Bridging Finance Advice please complete our Contact Form and of course if your enquiry is of a urgent nature please call me directly on T: 0207 9932044.
For property bargain hunters that can look past the cosmetic appearance and appreciate the potential this is difficult to understand and accept. Sadly, the mortgage lenders want to protect the here and now – they simply do not want an ‘undesirable’ property on their book. They direct valuers to comment specifically on the ‘re-saleability’ of property and in their assessment think about mass appeal rather than shrewd investors.
Can bridging be the solution for unacceptable properties?
What’s the solution then? Bridging can certainly play a part in the renovation process across both ends of the spectrum. It could be the property just needs a kitchen or bathroom fitted to make it habitable. Alternatively, it could have been a major build that has stalled as the vendor has run out of money. A bridging loan will provide the funds over a short to medium term period until the property is mortgage worthy again and can be refinanced onto a remortgage.
In the extreme it could be you want a finance repairs on a property that has suffered from subsidence and needs underpinning; or a property with by problems associated with pre-re-inforced concrete (PRC) that had been purchased under the Right to Buy from local authorities and were found to have corrosion or other defects as identified under The Housing Defects Act 1984 (now incorporated into the Housing Act 1985), if so a bridging loan together with expert advice made just provide the answer.
Bridging loans can heap huge rewards
With bridging loans the key is to look and concentrate on the end game. It’s not cheap when compared with traditional mortgages but as the saying goes it is short-term pain for long term gain.
For example, a Bridging loans might cost you £2,000 a month for 3 months, whereas a mortgage would have cost £700 if it were available to you. So you end up paying £3,900 more than expected over the period. However, on the flip side you bought the property under its true potential value and now it has been fixed up it is worth £17,000 more – you’re quids in – and perhaps living in an area that you thought would have been out of your natural reach.
In the current climate there is lots of property that needs to be shifted and is being offered at cut prices either though private sales on the internet or via auctions. By utilising bridging finance you are accessing this part of the market, where the real property bargains exist, as others have tried and failed to get a loan, as they have shopped in the vanilla mortgage arena. Furthermore, we can feeds from major auctioneers and we can share this information with our clients.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines.