Wednesday, October 28, 2015

The Rise of Rebridging Loans

Bridging loans have risen in popularity over the last few years. Before the credit crunch, bridging had a rather dubious image as a last resort product, but with banks still reluctant to lend on speculative property projects, the sector has innovated and bridging is now regarded as a perfectly acceptable form of finance.
Industry figures show year-on-year growth for bridging of 39%, competition amongst lenders is high and the product is constantly evolving. Demand at the front end for new loans is feeding through to increased demand for ‘re-bridging loans.’
Quite simply, this is a new loan to refinance a bridge which is at the end of its term or has expired. At Mint Bridging, we have a great appetite for re-bridges, and are widely regarded as the experts in this niche area of the market.‎
Most bridging loans are now used by property professionals to assist in portfolio growth, conversion and development.
Bridging provides huge flexibility and if used correctly, can help generate impressive returns. However, as the market for bridging has taken off, there has been a sharp rise in the number of borrowers running into difficulty with their loans.
Property projects are not straightforward and delays with planning, builders and unforeseen problems can all contribute to project overruns. Combine this with over-optimistic developers trying to minimise costs, and you have all the ingredients for a bridge that will encounter problems.
Borrowers may have finished their projects but have been unable to sell or complete a re-mortgage while the unfortunate ones will have run out of time and money, or be in default with repossession being threatened. The existing lender may extend, but the nature of the product means that extension rates tend to be unaffordable. It can also come as a shock to borrowers to have to find these new monthly payments, which were previously wrapped up in the facility.
This is where the re-bridge comes in. A new loan will give the borrower time to deliver their desired exit while simultaneously protecting their cash flow. Others will need to refinance and also borrow more funds to get the project completed.
So why don’t bridging lenders actively re-bridge? Historically, re-bridging was quite rightly regarded as a lending no-no.
If a client could not refinance pre-2008, when a plethora of products were available, there was clearly an issue and any re-bridging lender would be asking for trouble. So what has changed?
The days of credit repair are behind us, the profile of borrowers has improved and the product is used for different reasons. Despite these changes, many lenders have held onto their old beliefs. However, at Mint Bridging, we hold a more progressive view and understand the realities of completing property projects. We meet every borrower on site and work closely with them to deliver an exit. This hands-on involvement ensures that we can manage the risks in a controlled manner.
As a family business, we lend all of our own money and put a great emphasis on providing an honest, transparent and flexible service. We have a network of tremendously loyal brokers and repeat borrowers.
By Richard King, Business Development Manager at Mint Bridging

http://www.nacfbnewsletter.co.uk/news/the-rise-of-rebridging-loans/

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