Barry Searle is managing director of mortgages at Castle Trust Bank
It’s no secret that the capacity of the mortgage market is under considerable strain at the moment.
Brokers have reported record demand from clients at a time when all lenders have, understandably, introduced extra underwriting measures and are often working at reduced capacity to facilitate social distancing and home working.
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For many specialist lenders, any additional underwriting to understand how a customer’s finances have navigated the pandemic is relatively easy to include in an already hands-on underwriting process, but for more automated decisioning models, this is causing more disruption.
Consequently, the time to progress cases and secure offers is often completely out of kilter with the expectations of clients, estate agents and other stake holders who are putting brokers under even more pressure in a situation where their hands are tied.
You probably don’t need me to tell you that…
So, is there anything you can do to help the situation? It’s obviously important to manage expectations at times like this, and to work with lenders whom you can rely to provide you with clarity and certainty.
But there are also steps you can take to help your clients reach their objectives more efficiently.
If application processes are taking longer, and you have a client who is applying for a bridging loan and intends to exit it with a buy-to-let mortgage, why not take a more efficient route and combine the processes with bridge-to-let?
With bridge-to-let, your clients are able to take out a bridging loan for the short-term, with pre-agreed terms for a longer funding solution in the future.
This means that they can use the bridging finance to buy, refurbish or convert a property and then switch over to the longer-term funding when it is ready for tenants.
No need to go through the full application again, so there is no doubling up of your work or additional and potentially costly delays for your clients, which is particularly welcome at times like this.
Some bridge-to-let lenders can also factor in the value uplift resulting from any renovations when it comes to agreeing the terms of the buy to let mortgage.
According to a recent Bridging Market Study, carried out by EY, refurbishment is the most popular reason for borrowers to obtain a bridging loan and bridge-to-let is particularly popular amongst investors who want to maximise their returns by purchasing a property that requires some work in order to make it fit for purpose, carrying out the work, and then letting the property.
The most common example of this is light refurbishment, which is the term used for a property renovation that requires no planning permission or building regulations and where there is no change of use to the property.
Light refurbishment renovations commonly include a new bathroom, a new kitchen, redecoration, rewiring or new windows and it is a good way of adding both capital and rental value to the property with having to undergo significant structural changes.
With a light refurbishment bridge-to-let mortgage, a landlord can take a bridging loan to purchase the property and carry out the required renovations, before switching to a Buy to Let mortgage at the higher value, and small changes can deliver big profits.
At any time, bridge-to-let is a straightforward process that can provide investors with more flexibility and greater peace of mind than separately sourcing a bridging loan and a buy to let mortgage.
And in the current environment, it is becoming an even more essential tool for brokers.
Not only does it provide certainty in an uncertain world, enabling landlords to make longer term plans for their investments without carrying the risk of being unable to secure funding at the right price once the bridging facility comes to an end.
But it also creates efficiencies in the application process at a time when capacity in the entire mortgage system is under such strain.
So, if you are looking for a way to relieve the pressure, think about bridge-to-let.