News & Views

Fincorp drops minimum bridging loan size

Bridging lender Fincorp has announced it is dropping its minimum bridging loan size down to £100,000 immediately.
This reflects the growing demand Fincorp is seeing from smaller scale investors wishing to develop residential properties either to sell on or to let out.
Fincorp director Nigel Alexander says: "This decision is in direct response to the volume of enquiries we have been getting this year from brokers who want to be able to do deals at this level for their clients.
"We've always been up front that if we can't do a deal we'll say no, and quickly. But it seems ludicrous to keep turning down loans to good clients, particularly as we want to give brokers the confidence to put bigger loan deals through Fincorp.
"Simply put, we want to be able to say yes more often and this seemed a sensible and commercial way to do that."
Following several discussions with its investors to agree funding for smaller loan sizes, Fincorp is now able to offer bridging loans from anywhere between £100,000 to £5 million.
Alexander believes there are more people who see the value on offer by refurbishing auction properties for example, but that there is also a growing desire to be careful about how much debt they take on in one go.
And he added: "Although the banks are exercising caution and not repossessing properties left right and centre, there has been a lot of activity at the smaller scale end of the property market.
"That offers people the chance to make a good return but they don't necessarily want to start off at the half a million pound property level.
"It simply makes good business sense for us to be able to offer finance at this end of the scale too - and hopefully once people see how well bridging works at this end of the market it'll build their confidence to do more in the future."

Bridging is "good old fashioned lending"

Bridging loans have been wrongly cast as being at the sharp end of mortgage finance but are much closer to "good old fashioned mortgage lending", says Fincorp's Gary Playle.
Playle, Fincorp's business development manager, says there's a risk that some brokers write bridging off when it might be the right option for their clients because they're unsure about the whole process.
He says: "I can sympathise with a lot of brokers who see the word bridging and worry that it's complicated and too specialist for their clients.
"To be up front, when I first started in the bridging market I felt a similar way. But if you use a professional bridging lender the whole process is actually much more straightforward than a mainstream residential mortgage application can be with its piles of paper, application forms and constant demands for yet another pay slip."
Playle says there is still an entrenched wariness among brokers who would only consider recommending using a regulated bridging loan to a customer needing short-term finance between buying their new home and selling their old one.
But in fact bridging is more flexible than this and can be a good option for clients who are thinking about getting into basic property development or who want to invest in buy-to-let and hope to maximise their return by doing a property up before renting it out.
"In this instance bridging is much more akin to good old fashioned mortgage lending," says Playle.
"Mainstream lenders are no longer interested in lending on properties that don't fit the box or to people who have spotted a good investment opportunity but can't jump through every single last one of the 'computer says no' hoops. And buy-to-let lending is now much more commoditised locking a lot of people out.
"That doesn't mean it's not a good deal though. That's where bridging is misunderstood. It's got a lot to do with whether the investment case stacks up and with a lender like Fincorp, there is a personal relationship between the broker and our directors who personally consider each deal."
Playle also warns that brokers thinking about doing a bridging loan should do their research as the terms offered by different bridging lenders can vary widely.
He adds: "There are several very good lenders out there who are up front about what they offer and what they charge. As all brokers know, it's important that these details are nailed down from the start so clients don't get hit by surprise fees or charges. Bridging is a valuable tool in a broker's kit as long as it's done well."
Fincorp offers bridging loans at a flat rate of 1.5% per month but charges no fees at all, which can actually work out cheaper than many other deals with a lower headline rate.
"Our mantra is clear and simple. We don't try to hook people in with headline rates and then sting them later on with hidden charges. That's what makes things complicated for brokers and has given bridging a challenge in the past," says Playle.

Developer warns of unscrupulous lenders

A residential developer has spoken of the dangers of using unscrupulous lenders after one bridging firm almost lost him a fortune.
Dean Martin, property developer and owner of much-acclaimed Maids of Honour bakery, had put down a sizeable deposit on a house in Kew, South West London and spent a considerable amount of money refurbishing and upgrading it with a view to selling it on.
However, the developer needed a bridging loan to cover him while he sold the property. After being let down at the eleventh hour, as a result of an underhand practice employed by some lenders dubbed 'pretend to lend', Dean turned to Fincorp.
Fincorp was able to advance the £1.2million required in just five days. Without this Dean would have lost, not only the property and his deposit, but the money spent on the refurbishment too.
Now Dean is warning other developers of the problems that can occur when using untrustworthy lenders.
"The buzz phrase in the market at the moment is 'pretend to lend'," says Dean. "Some bridgers are actually making their money on this. They charge an arrangement fee up front so they're promised money regardless. Because it's so difficult to get funding at the moment these unscrupulous lenders are taking advantage of the desperation out there by getting these people to think they're going to lend. They can actually make more money out of pretending to lend."
The lenders in question take the fees then find reason not to follow through with the loan, thus keeping the fees without actually delivering any service.
Dean says this is a practice he has witnessed on several occasions.
"There are quite a few companies out there who are putting themselves forward as being really good bridgers and they're not; this practice needs to be stamped out," he says.
Dean advocates working with a bridging lender that you have built a relationship with. He says his longstanding relationship with Fincorp, as well as the lender's transparent, no upfront fees approach, means Fincorp will now be the lender of choice for him.
"At the end of the day bridging is all built on trust," he says. "And it works both ways. I think Matthew (Anderson, Fincorp director) had an element of trust in me too, which is really nice. Matthew pulled out all the stops for me. We will never go anywhere else."