While the cliché about the British and their fixation with queuing may have some merit, it would be wrong to assume that this means they love to wait. No one likes for things to take longer than they have to and that certainly applies to the property market.
This apparent impatience is well-founded, I suggest; after all, the longer something it takes, the more chance there is of something going wrong. If you’ve ever been gazumped, for example, then the quicker you can take that possibility off the table, the better.
Of course, speed is even more critical in the bridging market. The attraction to property investors is that bridging can provide funds quickly, allowing them to beat the competition and secure property fast, whether at auction or from another opportunity.
Unfortunately, Covid affected many aspects of the property market and bridging was not immune. Delays in certain aspects of the process and especially with valuations mean that bridging times have increased across the sector. But there are still ways that the broker can secure a faster bridging loan approval for their client if they work with the right lender with whom they can maintain an open, transparent dialogue.
The first aim is to get a positive decision to the bridging loan application as soon as possible. In order to achieve this, the broker needs to ensure that the correct information is provided about the case from the very beginning. Speaking from a lender’s point of view, the more information that we have then the better placed our underwriters are to evaluate the loan and decide whether it’s something that we can help with.
Complexity is a reality of specialist lending; we are used to dealing with it and overcoming issues. Any issues will need to be addressed so it is much better to be up-front from the beginning. In fact, the more detail the better.
The lender may well seek clarification from the borrower over the application. It could be that more detail is required on their personal circumstances or about the property, for instance. Again, if you’re looking for a fast decision – and for it to be a yes – then ensure that the borrower provides comprehensive answers to the lender’s questions and gets that information back as quickly as possible. In all likelihood, nothing will be happening behind the scenes at the lender until this happens.
Key to any successful bridging loan application is the exit strategy. Lenders need to be assured that the borrower knows at the outset how they plan to get out of the bridging loan; this could be via a remortgage, term loan or sale of property, for instance. Therefore the broker must ensure that this is indeed the case and that the borrower can articulate it fully to lender.
The exit strategy also needs to be able to be fully scrutinised by the lender. For example, if the planned exit is a sale, does the borrower have a realistic view on how much the property will be worth, taking into consideration local market conditions?
In today’s market, it is worth having a second exit strategy (a Plan B) in case the first one becomes less viable. Lenders will take more seriously those potential borrowers who have a realistic view of the market. Borrowers need to realise that their planned exit may not work out in their designated time frame and plan accordingly. Taking the example of sale of a property as the exit strategy, the broker’s client would be well advised to examine the rental value of the property if a sale became unviable in their time frame. Their backup exit strategy could therefore potentially consist of refinancing onto a ‘term’ loan while they rent out the property and consider their options.
A broker can prove their worth in many ways. These can include sourcing the right product and the right lender, but they can also be invaluable in helping to get the deal done in a timely manner. If they work with the lender from the outset and ensure that their client provides all the information required and at the first time of asking, then they will go a long way in ensuring a positive outcome for their client. That will hopefully result in repeat business and positive referrals.
Antrea Demetriou is Underwriter at London Credit