Finance Blog | Commercial Lending, Essex, London | first 4 Commercial

The Danger of Wasting Time

One of the greatest benefits of bridging loans is the speed with which they can be arranged. Bridging finance is most useful for properties purchased at auction requiring finance within 28 days, or for quickly securing a buy to let property for a good price.

However, we sometimes find that customers come to us in a panic after trying to secure finance elsewhere first. Optimism is a good thing in life, but trying to secure a mortgage for a property bought at auction or to secure a development property ineligible for a conventional loan means that investors are often left high and dry. More importantly, staking all your hopes on a buy-to-let mortgage can leave you seriously out of pocket. If you’ve got to the stage where you have invested in valuation fees, legal costs and surveyors fees, or even gone so far as to exchange contracts for a property that doesn’t have a kitchen and bathroom, then you’ll have wasted thousands to find out that the deal can’t even go through.

As a result, we recommend considering bridging finance from day one. Rates are low in comparison to historic bridging finance interest costs, and you won’t be risking losing out on a property or breaking a buying chain. You could also be saving yourself thousands of pounds in wasted costs. So don’t let a lack of finance hold you back; seek advice from us before you go any further.


Solving the UK Homes Shortage with Bridging Finance

With the cost of buying a property ever rising, then the government’s Help to Buy scheme launched in April 2013, attempted to address the problem. Consisting of two different schemes, a Help to Buy equity loan allows home buyers to borrow up to 20% of the cost of a home up to £600,000, meaning that a 5% cash deposit and a 75% mortgage makes up the rest.

The mortgage guarantee scheme works in exactly the same way as any other mortgage except that lenders are guaranteed 15% of the loan value should the mortgage holder default. Lenders can sign up to the Help to Buy scheme and pay a fee to the government for a seven-year taxpayer guarantee.

However, although in theory the Equity Loan scheme is a good idea; it comes with a big catch. It can only be used for new builds. With such huge demand for homes of all types, then encouraging new builds is a good thing. Yet we should also be making far more of existing properties which are in need of renovation.

Property developers need finance to transform unloved buildings into suitable domestic dwellings to fulfil demand, and these government schemes don’t address that. As a result, bridging finance applications are rising to meet demand for development finance. Unlike mainstream finance, a bridging loan allows developers to invest in dilapidated properties. Which is exactly what’s needed to solve the housing crisis and allow potential landlords to provide homes at a profit.

As a result, bridging finance remains the ideal way to finance development properties. For more information about how bridging finance can help you, then call us on 01277 620083.


Bridging Misconceptions

Reluctance to apply for a bridging loan is often as a result of the commonly held view that bridging finance is risky finance. Yet bridging loans are not only highly flexible compared to mortgage lending, but are also regulated by law and are subject to strict exit guidelines. Bridging lenders always carefully assess the purpose of a loan, and are very unlikely to lend if they don’t see a clear way of repaying the debt. After all, it’s in everyone’s interest for the loan to be repaid! If used correctly, bridging finance can be an extremely effective source of capital. So clearing up the misconceptions should allow you to decide whether a bridge loan is a good solution for your personal circumstances.

The perception of risk is normally as a result of property deals falling through. However, bridging lenders are also willing to practice forbearance, and extend loans to allow time for a property resale or refinancing. Moreover, all bridging loans are individually underwritten, meaning that lenders are very keen on ensuring the purpose of the loan is viable for the borrower. The borrower’s long term strategy is always carefully considered. Ensuring that borrowers plans are as robust as possible is essential.

The main point to bear in mind is that bridging loans do exactly what they say on the tin. They should not be considered as a long term finance option, but rather as a ‘bridge’ to capital. Keep this in mind and you’re unlikely to go wrong.


Looking for a Personal Loan? Consider P2P

Peer-to-peer (P2P) lending is being described as the ‘next gold rush’ amongst those in the know, and brokers offering P2P financing for personal loans are beginning to report massive uptakes in this revolutionary approach to lending due to the numerous benefits. Brokers with connections to P2P lenders can take the hassle out of securing a personal loan, essentially removing the middle man (the bank), speeding up the process from start to finish and reducing interest rates. P2P is becoming such a popular choice that it’s being reported that major banks are advising customer who have been refused a loan to seek out a reputable P2P lender.

Peer-to-peer lending is a part of the growing trend for moving away from traditional banking methods that can be associated with lengthy processes, strict criteria, and high interest rates, and transforming finance into a much more laid back, informal industry that’s simple and stress free for both lenders and borrowers. P2P has already gained a great deal of popularity within the commercial sector, showing particular success with companies such as Kickstarter, for example, and it is expected that this success can easily be replicated within the personal loans sector.

The market for peer-to-peer lending in the UK is estimated to total around £1.7bn, with that being divided roughly equally between the commercial and personal lending sectors. Experts in London’s financial technology community strongly believe that P2P lending is the next big thing in terms of personal borrowing, with 26 percent fully expecting the industry to be the fastest growing financial sector over the coming years, rivalling the increasing growth of mobile payments.


Non-Status Commercial Financing is Back in Business

Back in 2007, around the start of the UK’s housing market crash, major lenders began to cut back on lending to borrowers deemed to be higher risk – particularly to companies who were unable to provide detailed accounts records. Some lenders even removed their high risk financial products completely, and it was reported that an estimated 75,000 credit applications were rejected during this period, leaving it practically impossible for individuals with poor credit history, or for companies lacking adequate accounts records, to secure necessary financing.

Turning to High Interest Lenders

Many individuals and companies found themselves turning to high interest payday lenders, and although this type of short term borrowing has proven to be very popular, it is beginning to be phased out for fears that the economy could be greatly affected should businesses find themselves unable to afford the high interest repayments. In 2014, payday lenders were issued with limitations, both on the amount than can be issued, and on the interest that can be charged, maxing out at 0.8 percent. Furthermore, the UK Government is urging major high street lenders to offer products aimed at high risk borrowers in an effort to draw them away from risky financing options.

Creating New Financial Products

Many voiced concerns that payday customers would instead switch to illegal money lenders, but as more and more mainstream lenders are creating financial products to meet the needs of high risk borrowers through non-status financing, it is hoped that businesses, especially start-ups who are unable to provide accounts, will be approved for financial assistance through major lenders. It is anticipated that non-status commercial financing will make a welcome comeback during 2015.


There’s Never Been a Better Time to Buy-to-Let

When the buy-to-let industry really took off in the early 2000s, the concept was largely seen as a fad – a quick, yet temporary way to make a profit. However, as of 2015, the buy-to-let market is showing no signs of slowing down, and research even suggests that the industry could grow at an even faster rate over the coming years, with the current statistic of one in five homes being owned by a private landlord rising to one in three homes by the year 2032.

A Buoyant Market

So why is 2015 a good time to enter the buy-to-let field, and why is the market looking to expand by almost unprecedented rates in the coming years? Despite first-time buyer lending increasing, the economy is also continuing to recover from the recession, and house prices are rising sharply, with an average 8.5 percent increase during 2014. This is leaving many first time buyers unable to get onto the housing ladder and searching for alternative ways to secure suitable accommodation. Essentially, it’s an investors market out there.

According to the Council of Mortgage Lenders (CML), buy-to-let mortgage lending has risen by nearly 20 percent in the past year alone as more and more investors are starting to understand the advantages to private letting, including average gross yields of around 11 percent. However, experts acknowledge that, in order to see the best returns, timing is crucial. The good news for investors is that the time is now. With the market looking to expand dramatically over the next few years, there has never been a better time to jump on the buy-to-let bandwagon.


Why Common Views of Bridging Loans are Outdated

Bridging finance is often met with a degree of negativity, especially from media sources who claim that, by bridging the gap, homeowners are leaving themselves vulnerable to significant loss. When bridging finance was first introduced, this may well have been the case, but significant changes in the economy, and in demand, mean that these traditional views of bridging loans are now very outdated, and, in fact, bridging the gap could be a sensible option for many looking for financial assistance assuming they have a solid exit route in place.

So why has bridging finance transformed from what some believed to be a risky endeavour to something that’s now completely normal, even mundane?

There are many reasons, but two of the most popular are, of course, related to the ongoing effects of the recession. With many homes still valued at less than they were before the crash, and with exchange rates making foreign properties all the more attractive, buy-to-let investors are seeking new ways to fund their projects, and sun-seekers can purchase properties abroad quickly and easily, arranging mortgages and sales afterwards at their own pace. Reports suggest that bridging loan lending for foreign properties has risen by 22 percent in recent years, helping to make bridging finance a much more mainstream option for buyers and sellers.

Media sources are reporting that bridging loan interest begins at 0.75 percent, while others go even further and state that rates are frequently between 1.2 and 1.25 percent, striking fear into those looking into this type of financing option. In reality, figures are not that high, with rates as little as 0.65 percent per month from select lenders. Bridging finance is now an everyday part of the lending sector, hitting a milestone £1bn in 2013 and continuing to grow.


Fixed rate, up to 80% LTV and NO monthly payments

Castle Trust launches a new fixed rate product. We have long been able to provide access to Castle Trust’s innovative products at first4commercial. Such as their Index profit share mortgage, which tracks the national Halifax House Price Index and the Buy to let equity loan product, which shares in the equity growth of a property.

Castle Trust have now launched a new Flexible Zero Mortgage product which will allow clients to release equity from their buy to let properties or their own residence on a second charge basis (as long as this is for commercial/business use or the client is a High Net Worth individual).

The new product is for a loan of up to 5 years and to a maximum 50% LTV (80% gross when taking into account the rolled up interest for the term). There is also no upper age limit for applicants. Minimum loan is £25,000 and the minimum property value is £250,000.

A fixed rate of interest is set at the outset of the loan and interest is rolled up onto the advance and it is paid at redemption, which means there are NO MONTHLY PAYMENTS to make.

This allows clients to release equity to use as they wish with no monthly payments to make. The loan plus interest is repaid at the end of the selected term.

For loans secured on BTL properties there are no minimum income requirements either so there is another advantage to using these products.

All the products provided by Castle Trust are bespoke and therefore the criteria listed above is indicative only and may change depending on individual needs and circumstances.

Get in touch with one of the team today for full details and a tailored illustration to see if this is suitable for you or your clients.


T: 01277 620083 F: 01277 658900 E:

A: 5 Alyssum Walk, Billericay Essex CM12 0SS


Age and affordability criteria means a rise in bridging loans

Bridging Loans on the Rise due to Age and Affordability Mortgage Barriers

The majority of first time buyers are in their forties before they’re in the position to buy, however, new mortgage affordability rules introduced in April this year, means that now even well-off borrowers might be denied a mortgage if they’re over 40.

Being deemed ‘too old’ to buy in your forties might seem nonsensical, but increasingly mortgage providers are rejecting applicants on this basis under the new Mortgage Market Review (MMR). Many lenders are setting a maximum age beyond which they won’t let a mortgage run, even when those applying show they can afford repayments even after retiring.

Yet it’s not just those in their forties struggling with the new MMR rules. There are also a large number of existing borrowers in their fifties and sixties who are unable to remortgage or transfer their mortgage due to their age, despite the fact that the average work retirement age has been raised. And the financial ombudsman has been asked to intervene in more cases than ever before to allow existing mortgage owners to transfer their loan to a new property as lenders refuse to transfer, or port loans for older borrowers.

All of which means that those who simply want to downsize can’t, or that those who apply for a loan in their mid-forties are subject to a shorter mortgage life, which increases the cost of the monthly repayments. As a result, bridging loans, have risen exponentially since the MMR rules were introduced, with typical bridging finance averaging around £475,500.

For more help and useful information go to or contact the team.


T: 01277 620083 F: 01277 658900 E:

A: 5 Alyssum Walk, Billericay Essex CM12 0SS


Bridging Loan Case Studies

Bridging Loan Case Studies

When you’re looking for finance, it’s useful to know that we’ve helped all sorts of people with all sorts of finance dilemmas. So read two of our bridging finance case studies to find out how a bridging loan could be the ideal solution for you.

Bridging Loan for HMO Conversion

Tim came to us with plans to convert the home he had inherited into a house of multiple occupation. This large Edwardian house was ideal for conversion into flats, yet because he lacked experience in property development, banks were reluctant to lend. However, when Tim approached us after having sought building advice and created plans, we could see that he was able to handle the project.  We provided a 16 month bridging loan for Tim to fund the project, and once the house had been converted, Tim sold it on at a profit to a professional landlord.

Bridging Loan for Auction Purchase

Simi and Nick had been looking for a property to invest in before finding the ideal house for sale in auction. Although they had a deposit and funds for restoration, they were unable to arrange the finance quickly enough from a traditional bank to pay within the required 28 days after a successful bid.  So they came to us to see if we could help them pay for the property within the time frame. We organised the finance swiftly, allowing Simi and Nick to pay for their property, and refinance with their bank to exit the bridging loan.

For more help and useful information go to or contact the team.


T: 01277 620083 F: 01277 658900 E:

A: 5 Alyssum Walk, Billericay Essex CM12 0SS

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