Bridging the death, divorce and tax gaps


In a post RDR world advisers should be thinking more widely about how bridging fits into clients' financial planning
Many brokers are missing a trick by failing to use short-term bridging loans to help clients pay divorce settlements, income tax bills and inheritance tax bills.
Bridging lender Fincorp says brokers should look through their existing client books to identify how they can offer more holistic financial advice and explain where out-of-the-box thinking could mean bridging might solve a client's cash flow headache.
The short-term lender says many clients face large income tax bills twice a year not to mention many needing to pay off inheritance tax and divorce settlements quickly - and bridging could fill the gap.
Fincorp director Nigel Alexander says: "People rarely think bridging is used for anything other than covering the gap between buying one property and selling another but it's much more flexible than that.
"If your client has to pay a large IHT bill and needs the cash up front before their benefactor's property is sold, bridging can be a lifeline - especially in this market. The same is true for clients whose income is lumpy, have assets to secure a loan against but have a cash flow problem short-term."
Fincorp has said it is concerned that brokers are not aware of bridging and the opportunities it offers, but the lender claims post Retail Distribution Review is the perfect time to start.
"Many IFAs are finding their income streams have shifted considerably with commissions on investments and pensions drying up." explains Alexander.
"But there are considerable commissions still available on bridging deals and there are valid reasons why many clients could benefit from making use of a bridging loan where once they might have been forced to sell investments or the like to tide them through."
On average bridging pays brokers 1% commission and is far more lucrative an income stream than residential mortgage finance which tends to pay around 0.3% in proc fees.
Lucy Hodge, director of bridging distributer Vantage Finance, says: "It makes complete sense to have as many strings to your bow as possible when assessing a client's borrowing needs to ensure you are offering best advice and not missing out on potential income. Short-term finance has proven to be far from lending of last resort and in many cases throws a much needed life line to clients."