How the industry has evolved to benefit many borrowers
Gateways have evolved exponentially in recent years. Ten years ago, bridge financing and its benefits were not widely discussed, it was seen as a product for experienced investors facing a lack of liquidity or those who had used bridge financing before.
Fast forward to today and the transition is now seen as an effective financial solution for a much wider audience.
Current market conditions in a context of uncertainty have played an important role in showing the opportunities that bridging finance can offer.
It is no surprise that I tell you that the last twelve months have had a profound impact on the real estate market.
The Stamp Duty Holiday encouraged buyers across the market to take the next step and take advantage of the government incentive, and bridging funding has had a key role to play here.
From urgent purchases at auctions to aid to chain breaks or downsizing, bridging loans have helped people from top to bottom of the chain secure their property quickly and make the most of their current savings.
Spending more time at home has also transformed us into a nation of do-it-yourselfers, with homeowners starting home projects ranging from installing new kitchens to overseeing large-scale extensions or restorations.
Transition finance can be used to finance both minor renovations or major structural changes, which has allowed the residential market in recent months to fund these projects in an alternative way.
Bridge financing is also a useful tool for professional investors and owners looking to maximize the potential of their assets.
An example is a developer who owns a portfolio of commercial spaces and instead wishes to adapt the property into residential housing.
The death of Main Street has been widely reported, but the shift to remote working during the pandemic has also left office spaces in a vulnerable position.
For homeowners who have a considerable portfolio of commercial space, it is essential that they can quickly develop their properties into more usable spaces for the future.
One of the real differentiators of the transition from other more traditional financing options is the speed at which investors can access capital. In situations where traditional lenders may need borrowers to meet certain criteria and not lend for larger and more complex projects, transitioning may be the specialist solution.
Short term loans are assumed to be insanely expensive, but the market is currently very liquid, which means that competitive rates with flexible repayment options are increasingly available to customers.
Shawbrook Bank offers bridging loans with transparent costs, no hidden fees or late interest, which helps customers understand where they stand from the start.
Previously, once a client took out a bridging loan for a short, fixed period, that meant the end of the relationship with the lender, but now we are able to provide a cradle-to-grave solution for our clients.
What may start out as a bridging loan can now progress smoothly into a longer-term offering such as a rental mortgage.
Establishing a clear exit up front is a critical part of any loan program and allows for a faster and cheaper process in the long run, with clients not having to renegotiate a year or two down the road.
For a professional owner or investor, knowing where you stand and having a clear solution in place from day one allows you to plan your next step. Whether the goal is to rent the property or sell it to raise funds for your next project, the cash flow benefits of the transition are clear.
At Shawbrook, we work closely with a panel of specialist partner brokers to find effective solutions for their clients, from bridging to second load.
We work closely with the broker to gain a deep understanding of their clients’ immediate and long term priorities. We have seen a significant increase in the number of clients looking for a bridging loan, but without giving much thought to the next steps.
It’s our role to make sure customers feel supported from the start, working with them to understand what the future holds even if they don’t know it yet.
Gavin Seaholme is Sales Manager at Shawbrook Bank