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.