Investors use bridging to finance bargain basement buys

Brokers have seen a 200% increase in demand for bridging finance in the last nine months as investors have been seeking bargains at auctions and through other distressed sales.

A number of smaller bridging firms have had to withdraw because of a lack of funding over the past year. However, unlike the mainstream market, the main bridging lenders have been able to offer a consistent supply of products without having to alter LTVs or rates dramatically.

Gary Booth, CEO at Tiuta, said: “Brokers that have adapted to the changing environment have been very successful in 2008. We are regularly seeing brokers place several cases a week as their more experienced buyers snap up bargains. With falling interest rates we expect this to continue as the primary residential market is still relatively static, but the demand for rental is increasing, which is creating a thriving market for brokers and their clients that can move quickly when opportunities occur.”

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Mayfair offers below market value bridging product

Mayfair Bridging has launched a new product called BMV Bridge.

It is designed for below market value (BMV) purchases and offers 100% of the purchase price within 65% LTV for investment residential property and 60% LTV for commercial property.

Director Shoaib Bux said: “BMV Bridge takes advantage of the discount received on a property purchase and offers the investor 100% of the purchase price. The majority of lenders now specify a minimum ownership period of six months before they allow a remortgage to take place. This product overcomes this by offering 100% of the purchase price with six months’ interest being retained. At the end of the term the borrower will have the option to remortgage the property with the majority of lenders on the open market.

“The minimum ownership rule of six months has made it very difficult to redeem a bridging loan prior to this period, with a handful of lenders being an exception. Mayfair do not have any early repayment charges so if the loan was redeemed early then the borrower would not be penalised and any unallocated interest would be credited.

“The current credit climate has made it hard to obtain viable exit routes but this product takes the pressure off from the borrower giving him a wider choice of lenders at the end of the term. There is very strong demand for BMV Bridge and Mayfair still have a very strong appetite to lend. We are committed to the broker market and are proud of the strong relationships already formed with our packaging partners.”