Third charge bridging loans

Second or third charge bridging loans could be the solution in cases where there is an existing mortgage on your property but there is equity available so that you can still be approved for a personal loan. Second Charge Bridging loans on the other hand are a much less difficult loan to get than a third charge loan. In the case of third charge bridging loans there are several pieces of criteria that you must meet in order to be approved. A spotless credit record would be exremely helpful, but since so few people possess this rare and elusive bird the spotless credit record, it is still quite possible to receive one with less than perfect credit. And the reason for this is that lenders who give third charge bridging loans become the third in a line of priority on repayment. So it is more difficult for them to receive any recompense in the event that the loan goes south.

If you do some searching among the many offerings of third charge bridging loans, you may find that there are really not many to choose from. The reason being that with a third charge bridging loan, they will require the first or second charge loans to be gone, usually by paying them off, which then makes it possible to make the third charge loan, which in actuality is more similar to a second charge bridging loan, now that the second charge loan no longer exists. It will be more difficult to secure this type of loan, because while the competition among lenders to be first or second charge lender, not many lenders want to be in the third charge position.

Due to the riskiness of the third charge lender’s position, there is no guarantee that you will get all your other payments made on time, so the lender who is in charge of the first charge loan may be able to steal the deal. This is why third charge bridging loans supply you a much lower loan amount compared to first or second charge loans. Not too mention the money you do get won’t reach a percentage any higher than 70% of your property’s real value.

Small business bridging finance

Small businesses are struggling to source suitable finance from their business bankers and are turning to alternative sources of funds such as bridging loans.

Despite the government’s Enterprise Finance Guarantee, a loan guarantee scheme to facilitate lending to viable businesses, many small businesses have had overdrafts removed, facilities tightened and their loans called in by their banks.

John Waddicker, director of Positive bridging Finance, said: “There are a number of reasons for this. Banks claim that the number of applications have dropped and therefore demand is lower than it was pre-recession. There is the issue of satisfying strict lending criteria and conditions that are attached to loans that so often put off borrowers from taking out a loan with a bank.

“Banks also have an issue with credit scoring to sort out. It might also be the case that potential borrowers are now less trusting of their bank given the recent negative publicity and a general increase in fees or security requirements associated with such lending.”

The lack of lending to small businesses has caused the Royal Bank of Scotland to launch an independent review of its small business lending practices.

Positive bridging said that RBS, which is 81% government owned, had previously admitted to having £20bn that could, in theory, be lent to UK business.

But RBS’ net lending to business fell by £1.6bn in the first three months of 2013 despite its access to the Funding for Lending Scheme which has been implemented to help banks lend more money.

In the first half of 2013 Positive Bridging Finance has seen a rise in the number of SMEs applying for bridging finance of over 42% compared to the same period in 2012 and the firm expects this trend to continue during the remainder of 2013.

Waddicker said: “Bridging finance gives breathing room to make alternative arrangements and can be used as an ‘ad hoc’ facility for certain circumstances as and when required provided an exit strategy is formulated.

“As the high street banks shy away from speculative property purchase and investment bridging finance lenders open their arms and welcome such activity.”

Property Costs Are On The Rise, But Where Are They Leading?

For most of the UK, housing costs are being reported by the media to be rising at the quickest rate since 2006. This has been evident when looking at the increase in the last 4 months. Both Wales and England have experienced such increases, with the largest increase being reported in London and the South East. It has been reported that this increase has been over 8 percent in the past year alone. The areas that have shown the greatest increase in the cost of properties are, ironically, the same areas that experienced the worst of the the financial turmoil. However, not all areas are showing such an increase as Northern Ireland and Scotland are reporting a continued decrease of property values. The good news is that these decreases are lessening. When looking at the UK as a whole, the past 12 months has brought about an overall increase of 3.1 percent.

There are a number of reasons that are coming into play in the UK that is allowing for this increase. One reason is a constant lower rate of interest that the lenders are passing onto their customers. Incentives from the Government, such as the help to buy program,  is allowing people to purchase homes now, when they were unable to do so in the past. By allowing people the option to purchase newly built homes, not only will the people become homeowners, but the construction industry benefits as well. When looking at the amount of new constructions, it is easy to see that this venture has been successful both for new homeowners and the construction businesses. This success has encourage the Government to continue offering this program next year, while it will include properties that are already in existence to the program.

A huge cause for rising prices is the increased availability of financial lending options. Without mortgages less people would be able to make a home purchase, therefore; decreasing housing demand. The past year has seen lenders who are offering their customers more flexible funding, making a mortgage something that is now within their reach. This has been evident in the lenders offering bridging loans over the past three years.

There are many people who benefit from the increase of housing costs. Current homeowners who are looking to sell, landlords who own several rental units, people in the construction industry who build the homes, the agents who are selling the real estate, removal firms, and those brokers who underwrite the home loans and lend the money for the mortgages.

Bridging finance is on the rise

As of August 13,2013, bridging loan figures were showing a second quarter rise.

During the second half of 2013, the number of bridging loans taken out went up more than 16%.

According to the Association of Short Term Lenders (ASTL), there was an almost 17% increase in these types of loans; the number of applications went up to more than 2,600, or an increase of 5.3% during the three months from June 30, 2013.

The trade group also remarked on an increase of 15% from quarter to quarter since its members received loan applications of 1.3 billion pounds, an increase from 1.1 billion pounds previously reached in the prior quarter.

ASTL members gave out loans of 281 million pounds during this three month time period, a slight decrease from 283 million pounds lent out during the year’s first quarter.

However, it showed a 3.5% increase in the lenders’ loan book values, since the total loan book at the end of the quarter was worth about 1.14 billion pounds as compared to 1.1 billion pounds in the first quarter ending on March 31, 2013.

Chief executive for the ASTL, Benson Hersch, said that in addition to one traditional purpose of bridging the gap or that time between which people sell one property and then purchase another, it becomes increasingly clear that bridging and alternative methods of funding are being utilized more frequently by SMEs to meet funding needs.

The members are reporting a steady demand in this quarter, and he expects next quarter’s numbers to continue to increase.

There are currently 23 full members of the ASTL and 11 associate members. This group offers short term or bridging mortgages or loans.

The government has an Enterprise Finance Guarantee, this being a loan guarantee to enable viable business enterprises to obtain loans. Many small businesses have seen their overdrafts taken away, facilities were tightened, and loans were called in by their lenders.

Positive Bridging Finance director, John Waddicker, stated that there are a variety of reasons behind this. Banks are saying the number of applications has decreased and demand is lower than it was before the recession. There is very strict lending criteria that must be satisfied and loan conditions that prevent borrowers from going to a bank for a loan.

Banks have a credit scoring issue to get sorted out as well. Potential borrowers do not trust banks as much because of negative publicity and an increase in fees and security needs that go along with these loans.

The Royal Bank of Scotland has launched its own independent review of its small business lending practices because of the lack of small business loans.

RBS, owned 81% by the government, admitted earlier that it has some 20 billion pounds that could be loaned out to UK small businesses.

However, RBS’ net loans to businesses decreased by 1.6 billion pounds during the first quarter of 2013 despite the Funding for Lending Scheme that works to increase lending by banks.

During the first half of the year, Positive Bridging Finance has noticed an increase in the number of SMEs who applied for bridging finance over 42% compared to the same part of 2012; they expect this trend to continue throughout 2013.

Waddicker stated that bridging finance allows for breathing room to make alternative loans and can be used to facilitate such loans when necessary as long as there is an appropriate exit strategy put into place.

The high street banks will continue to stay clear of speculative purchases of property while these investment bridging lenders continue to bridge the gap and wholeheartedly welcome this type of activity.

Bridging loans in a mortgage market

A housing bubble contributed to the Great Recession. Whether or not the Great Recession has ended or not is a different matter, but there are signs of improvement. Housing developers are eager for the recovery, but many people fear that a new housing bubble may be on the horizon. Economists and financial experts fear that property development bridging finance loans may need to a new collapse and a new housing bubble.

Southern England and parts of London have seen rising property values, but other parts of the United Kingdom have not seen the same progress in the other areas of Great Britain. Property values in Scotland, Wales, and Northern Ireland have remained the same. Some people think the answer lies in property bridging loans. Other experts do not believe that these are the solution.

Other people in the know do not believe that the answer lies in the ease of financing created by bridging loans, but rather in factors that are unique to the areas seeing the boom.  The southern areas of England are seeing an increase in demand for the lands in the area.

Although property developers find the bridging loans to be an attractive aspect of real estate, it is a relatively small part. The industry takes in approximately 1.5 billion pounds per annum. Mortgage firms take in considerably more, nearly 140 billion pounds on a yearly basis.

Bridging finance loans have only had a small impact on segment of the housing industry in a small section of Great Britain. The real estate market remains stagnant all across the world, and other experts expect that Chinese real estate over development may have a much larger impact.

This relatively new form of home financing may cause a small bubble, but it is simply not large enough to have a huge effect on the economy. It took a while for the world to come out of the Great Recession, and it has fully not recovered. Everyone has an understandable concern when it comes to the world economy.

What are bridging loans?

A bridging loan is a method to obtain financing for the simultaneous sale of a property, whilst purchasing a new one. It ‘s a way for homeowners and business owners to sell their current property and move to a new one, without worrying about how to pay the additional costs, such as payment and closing costs.

Organisations that look at the bridging loan oppertunity will value old estate loans and retains its value and the probability of sale. This allows many people a bridge loan, which can not get to get other types of loans.

You should consider all options and even speak to a financial advisor before committing to such bridging finance, as it is usually seen as a short term loan. It also does not require you to make payments during the initial period of the loan. Instead, you should be selling your old property during this period, and if this is the case, is to pay the full amount of the loan.

It’s also important to understand that during the period of emergency, while the payment is not due, interest will occur. This can make it a bit ‘more expensive than taking an equity line to pay moving expenses, but that being said – the bridge financing is readily available to many borrowers when not available else where.

If you are still unsure if you require a bridging loan, or if you have exhausted all of your other options then you can speak to WP Financial today to help resolve the matter.