Bridging & Commercial Supplement — A guide to bridging finance

Guide to bridging finance

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Guide to bridging finance

Welcome to the Bridging & Commercial Magazine guide to bridging finance, in association with Market Financial Solutions

Contents 4-5 6-7 8-10

An introduction to Market Financial Solutions MFS Market Research â&#x20AC;&#x201C; Sentiment on UK government and housing Case Studies

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Guide to bridging finance

An introduction to

Market Financial Solutions Market Financial Solutions (MFS) was founded in 2006, due to the demand for bridging loans from clients who were initially looking for traditional mortgage solutions, but were finding that these transactions were not completing quickly enough. Here at MFS we pride ourselves on delivering bespoke bridging loans, swiftly, to enable our borrowers to complete on their property investment plans. We specialise in complex circumstances, where the situation calls for out-of-the-box underwriting. We will assess all deals individually, which allows us to make decisions that other tick-box lenders are not able to. This will include looking at the bigger picture to understand the clientâ&#x20AC;&#x2122;s entire situation, often taking into account their experience in the property market when looking at more intricate deal structures. This bespoke way of working does not slow down proceedings however, with deals completed between three and 10 days. Our average turnaround time, taking into account external delays, is in fact only 13 days. We will deliver bridging loans for 1st and 2nd charges on residential and commercial acquisitions, for both individuals and companies. We specialise in finance for auctions, refurbishment, and light development. Importantly, we also provide a seamless service to overseas clients, who can also utilise our bridging loans in any of the aforementioned circumstances. We have been lending throughout Covid, and in order to do our part in the recovery of the sector, launched our Covid-19 Recovery Fund to help those that have been let down by other lenders retreating from the market. We are dedicated to providing funding to make sure that property transactions continue to complete for the rest of 2020, and into 2021 and whatever it may bring for the industry. 4

Guide to bridging finance

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Guide to bridging finance

HOW CAN BRIDGING HELP IN THE CURRENT CLIMATE? A new survey of 2,000 UK adults has revealed their thoughts on the housing crisis and the government’s attempt to support homebuyers and the wider economy. Findings included:

» 51% consider the housing crisis to be one of the biggest issues facing the UK

» 19% are considering buying a property before the stamp duty holiday expires on 31st March 2021

» This figure increases to 32% for those aged between 18 and 35

» 44% believe the media focuses too much on

worst case scenarios in its coverage of Brexit and Covid-19

» 49% are satisfied with Rishi Sunak’s Covid-19 support and stimulus packages, compared to 16% who are dissatisfied

With 51% believing that the housing crisis is one of the UK’s biggest issues, it’s clear that policy and direction need to fundamentally change to address, and solve, the problem. But, how can bridging help? When there’s uncertainty in the market, as this research shows, it’s important for all involved to boost confidence and keep things moving. Whilst the government drives policy, and can make material changes, it can’t be done without the rest of the market playing their part. Firstly, mortgages are currently taking longer to approve, and this is putting transactions at risk. This is particularly of concern at the moment, with almost a fifth of those asked wanting to take advantage of the stamp duty holiday before it ends at the end of March 2021. The only way that they will be able to do this with certainty is to understand their options outside of the high street banks, and be confident enough to transact on this kind of funding with the help of their broker. It is up to bridging lenders and brokers to make 6

sure that the market is educated in all of the options available to them to ensure that these transactions make it through before the deadline. Without it, gazumping and gazundering will increase, as more time provides those searching and selling with opportunities to move the goalposts many times before completion. With bridging deals able to complete within three to 10 days, rather than the average 45 days associated with traditional mortgages, the benefits to borrowers and brokers is clear. Bridging, as an industry and a community, should also start to tackle the ‘worst case scenario’ view that is often taken by mainstream media. 44% think that too much focus is on this, making it clear that we need to try to instil confidence back into at least our part of the market. If we can show the press and the wider industry that bridging is here to help and it’s here to stay, then this can aid continued movement. Paresh Raja, CEO of MFS, says: “While the government is often keen to stress just how important the housing crisis is, events like Brexit and Covid-19 have obviously been prioritised. This a reflection of the complex challenges that the UK is facing at the moment. “Importantly, however, Britons seem to be behind the support and stimulus packages that have been announced to help those affected by the pandemic. This includes the stamp duty holiday, which has been among the most effective initiatives. According to Halifax, house prices in October 2020 were 7.5% higher than the same month a year earlier. Clearly many are still hoping to take advantage of the holiday, too. I for one would like to see the SDLT holiday extended in order to more realistically facilitate this. “Over the coming months, the government must focus on the housing crisis. However, it is also up to those involved in the property market— lenders, estate agencies and brokers—to ensure they are doing everything in their power to help prospective homebuyers.”

Guide to bridging finance

MFS MARKET RESEARCH – SENTIMENT TOWARDS UK GOVERNMENT – Q4 2020

62 49% % 44 %

believe that the housing policy is an important issue that has been neglected by successive UK governments

are satisfied with the Covid-19 support and stimulus packages put forth by the Chancellor for UK businesses and consumers

believe that the UK’s media focuses too much on worst-case scenarios in its coverage of Brexit and Covid-19

51

%

19

%

51% consider the lack of affordable housing to be one of the biggest issues affecting the UK

19% are considering buying a property before 31st March 2021 as a consequence of the SDLT holiday

The market research was carried out between 30th October and 4th November 2020 among 2,000 UK adults via an online survey by independent market research agency Opinium. Opinium is a member of the Market Research Society (MRS) Company Partner Service, whose code of conduct and quality commitment it strictly adheres to. Its MRS membership means that it adheres to strict guidelines regarding all phases of research, including research design and data collection; communicating with respondents; conducting fieldwork; analysis and reporting; data storage. The data sample of 2,000 UK adults is fully nationally representative. This means the sample is weighted to ONS criteria so that the gender, age, social grade, region and city of the respondents corresponds to the UK population as a whole.

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Guide to bridging finance

CASE STUDIES

study 1

Trust in your lender

One of MFS’s longstanding clients got in touch regarding a new investment opportunity. The borrower had found an asset to add to their existing portfolio in central London. But they needed to raise funds quickly, as they had been offered a good purchase price with a short expiration date. MFS is known for its speed and transparency, so the client felt confident that it would be able to help with their future investment. On such short notice, many lenders in the current climate may turn away potential deals that require a 70% LTV and a loan amount as high as £1,850,000. But with in-house funds and established funding lines available, MFS had no issues at all helping a trusted, returning borrower. They requested valuation reports that arrived in under 48 hours and were quick to instruct solicitors. Having used MFS many times in the past, the client’s details were close to hand, which ensured that documents could be filled out and processed quickly. Funds were released and the borrower was able to complete with no issues in a tight two-week deadline. They were very happy with the service they received, for this and every deal they had completed with MFS, and with their new property investment.

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Guide to bridging finance

study 2

Commercial refurbishment

With lockdown restrictions still in force and some shops remaining closed, the additional risk and precautions on commercial assets is easy to understand. But lenders should note that despite the pandemic and lockdown disruptions, commercial assets still hold strong potential value in the property industry. MFS recently received an enquiry from an existing borrower regarding a vacant office building that the borrower had recently purchased. As an experienced property investor, they had several assets within their portfolio and, while heavily focused on residential, they were no stranger to the occasional commercial asset. The client was looking for a first charge refurbishment loan, with an LTV of 65%, to raise ÂŁ400,000 to fully refurbish the building, as well as a couple of their residential properties, too. Time was a key element. They were looking for a quick completion so that the works could commence. The borrower was looking to find a new tenant for the building and therefore the refurbishment needed to be completed as quickly as possible. However, should the property remain unoccupied, the borrower was also happy to sell it. Providing two viable exit strategies offered additional comfort that the MFS underwriters took into consideration when completing their initial assessment. Every bridging loan is different, and the process is rarely a straight line. During the loan processing, information for the leases needed to be confirmed but the freeholder struggled to get a hold of the paperwork. Despite these setbacks, the MFS team found ways to keep the deal moving to ensure the funds could be released and the refurbishment work started on time.

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Guide to bridging finance

study 3

Large investment funding you can count on

Uncertainty has undoubtedly affected the way many lenders can conduct business, with coronavirus reducing the number of available bridging products. Unfortunately, lowering LTV levels and the avoidance of large loans are a couple of key side effects affecting borrowers. MFS recently received an enquiry from a client who was seeking to take advantage of the stamp duty holiday to build on their flourishing property portfolio. They had found a prime piece of real estate in the heart of London, which they were looking to utilise as a BTL property. They had already paid their deposit, but completion needed to happen quickly. With the deadline fast approaching, finding a mainstream finance provider who would be able to provide a loan of ÂŁ1,500,000 at 75% LTV on such short notice was proving next to impossible. They needed a bridging loan urgently, as they faced losing their future investment, as well as their deposit. Reacting quickly to their needs, the MFS team began their process of underwriting from day one, to ensure that there were no aspects of the loan which could prove problematic. The long-standing relationship that MFS has with its solicitors allowed them to pick up speed from the offset. Requesting valuation reports within 24 hours enabled them to swiftly instruct lawyers and complete paperwork in only two days. The borrower was able to complete before the deadline, relieving them of any potential stress. They were delighted with their new investment and the service that MFS provided on such short notice, despite the large loan requirement.

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Andy Reid Head of Sales, UK Email: andy@mfsuk.com Phone: 07956 778484

Ian Miller-Hawes Head of Sales, London Email: ian@mfsuk.com Phone: 07538 542444

Scott Lord Senior Underwriter Email: scott@mfsuk.com Phone: 07931 668852

Richard Dâ&#x20AC;&#x2122;Souza Senior Underwriter Email: richard@mfsuk.com Phone: 07508 148174

Market Financial Solutions Berkeley Square House Berkeley Square, Mayfair London W1J 6BD United Kingdom

020 7060 1234 info@mfsuk.com www.mfsuk.com

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