Brooklands CF Bridging and Development Finance SeminarMake Text Bigger
Thank you very much to Malcolm and his team at Brooklands Commercial Finance along with Shawbrook Bank for running the seminar and using the Shawbrook offices in the heart of the City.
We started with a Mortgage and Lender Market Update in particular discussing rental stress testing and the amount you can borrow by using the advantages of criteria on 5 year fixed rates and in the name of a limited company.
PRA rules allow Buy to Let stress testing at the actual pay rate not an additional notional rate on products fixed for 5 years or longer
E.G: If you were to borrow on a BTL product in your Personal Name
- Rental income of the property = £1500.00 pcm
- On a variable or 2 & 3 Year Fixed rate product the maximum you could borrow would = £233,000
- For the same lender using a 5 Year Fixed the maximum loan would = £321,000
There are additional stress testing advantages using a Limited Company
- Rental income of the property = £1500.00 pcm
- On a variable or 2 & 3 Year Fixed rate product the maximum you could borrow would = £261,000
- For the same lender using a 5 Year Fixed the maximum loan would = £360,000
This is why (in addition to avoiding Section 24 mortgage interest relief restrictions) borrowing for new purchases in the name of a Limited Company is now so popular with 70-80% of new loans all in the name of limited companies.
Bridging Finance is increasingly popular and widely available.
The percentage market uses for Bridging Finance is very interesting and broken down below
- 27% were used for refurbishments
- 25% were for mortgage delays and chain breaking
- 15% were for other purposes – such as divorce bills
- 13% were re-bridges
- 11% were for business purposes
- 9% were for auction finance
Bridging Finance considerations that should be taken into account:
- Lender arrangement fees vary from 0% (Shawbrook Bank product) to 2.5%
- Interest rates vary from 0.43% to 3% pcm with the average rate of 1% or below due to the highly competitive bridging market
- Minimum loan size £30,000 up to £15 million plus
- Exit fees 0% to 2.5% of the loan amount or GDV (Gross Development Value)
- Loan durations can be from 1 day to 36 months
- Draw down facilities are available for stage payments
- Available on 1st and 2nd legal charges for regulated and non-regulated purposes
- Other costs to consider include Legal fees, Valuation fees and Monitoring fees
Another innovation in the market uses a new term of ‘Bridge to Let’. This is where a Bridging Loan can be taken out to purchase a property and then as previously agreed by the lender converted to a long term loan (mortgage) up to a maximum of 75% LTV. This significantly reduces cost, complexity and the risks of using two lenders and or applying for one loan after the other.
- Rates starting at 4.00% above base rate (0.75%)
- Loan sizes range from £100k – £10 million +
- Staged drawdowns – interest only charged stage payment is drawn
- Interest added and rolled up into the loan
- Decisions in 48 hours, every project considered including complex cases
- Experienced (minimum of 2 similar sized development already undertaken) and non experienced enquiries can be considered
- Loan terms range from a minimum of 6 months to a maximum of 36
- Access is available for 100% development finance for the build costs and up to 90% of land purchase price, including interest rolled up
Shawbrook Short Term Loans + Refurb Cost
Can assist investors looking to add value to property and attract higher yields and conversions from residential or commercial to HMO or multi-let
Landlords who will need to amend the property layout pending HMO license and regulation changes. Any property with 5 or more people (no longer 3 storeys or more) 6.51m2 for a bedroom occupied by a person over 10 years old 10.22m2 for a bedroom occupied by two people over 10 years old Minimum EPC requirements for all residential and commercial property E or better
Key criteria for the new “Lending for Refurb Costs” option include:
- Available on light refurbishment projects across residential and semi-commercial security
- Loan may not exceed either 85% LTV against the lower of Day1 purchase price or value, OR 70% of GDV or after works value (whichever is lower)
- All funds advanced to borrower on Day 1
- No QS required, just an interim inspection at the end of month 3 (as per current process)
The pricing structure for this product option is simply a 0.10% loading to the standard 75% LTV margin making the available rates as follows:
Single lets/ Multi-units/ HMOs: 0.80% pm Semi-commercial: 0.91% pm
The above gives a flavour of what is available currently for property investors in the Bridging and Development finance market.
If you require assistance with any type of property finance including straightforward BTL please contact Malcolm Jones and his team at Brooklands Commercial Finance using the contact form below and they will be happy to help.