3 minute read
Foreword
By Gareth Lewis
Commercial director at MT Finance
Whether your client is enlarging an existing property’s footprint to increase living space, or converting a commercial asset to residential, a heavy refurb bridging loan can be a powerful tool for homeowners, landlords and property investors looking to achieve a variety of different goals, including upping the value and maximising space.
As demand for UK property remains high and supply low, many borrowers are turning their attention to their existing assets and looking at how potential can be maximised. For those looking to do this, there is often the challenge of getting the necessary funding in place. When time is of the essence—as it so often is—a bridging loan could be the ideal solution here, as it can give borrowers access to funds quickly so they can seize the opportunity. While speed is often a key consideration for most borrowers, their reasons for renovating vary. For landlords and investors, the decision is often rooted in commerciality, especially with the current economic uncertainties requiring many to scrutinise their existing properties and portfolios. With inflation continuing to rise, it is vital that landlords not only cover their overheads but have enough margin for error. The best way of achieving this is by ensuring they are getting maximum yield out of any rental property. There are usually multiple ways an investment property can be made more profitable, from light modernisation to more substantial structural works, including extensions and reconfigurations. It is likely that any increase of the square footage will help to secure a higher rental income. A property’s use should also be considered. If a developer has unprofitable or empty commercial spaces, then it could be worth turning these into HMOs. Not only would this help provide some of the much-needed private rental units, but recent changes to permitted development rights has helped to make this process smoother. This means that some projects would not need to seek planning permission, as long as they adhere to the limitations and conditions. The removal of this potential roadblock could speed up the refurb process dramatically, including securing finance.
For homeowners, the impetus to renovate is often more personal. With many finding themselves increasingly priced out of the market, updating their current property is a way of creating the living space they want without having to move. While there are options to obtain additional finance via high-street lenders, these processes can often be lengthy and somewhat restrictive. A regulated bridging loan offers much more flexibility while being significantly quicker. It also allows homeowners to unlock equity in their homes to fund these projects, by way of either a first or second charge. This makes regulated bridging loans particularly useful for borrowers who have repaid their mortgage or bought with a good LTV and have enough equity to utilise. Another benefit of a regulated bridging loan is that if the borrower does have a mortgage, then a second charge will not interrupt their current rate. This is a definite plus for borrowers amid the threat of further interest rate rises. The versatility of regulated bridging finance is clearly resonating with homeowners. In fact, Bridging Trends reported in Q1 2022 that it accounted for 43.9% of contributors’ transactions, up from 36% in Q4 2021. I have to say that I’m not surprised by this jump. In the 18 months since our regulated team launched, demand has steadily grown. Thought should also be given to what constitutes a heavy refurb and how this definition can be used to help clients. Here at MT Finance, it is usually categorised by structural works taking place. These include building an extension, a new roof, removal of internal walls, or a full-scale conversion. While criteria are helpful, boundaries can sometimes be blurred on more complex cases. Our ability to take a common-sense approach to every case allows us to deliver tailored solutions for every client. These include facilitating further drawdowns for unregulated cases, allowing customers to borrow more as the works progress. Terms can also be adapted and our lack of ERCs or exit fees allow for total flexibility. Throughout this supplement, we’ll show you how regulated and unregulated heavy refurb bridging loans can help your clients.
