Visit the website of any mainstream lender and you will typically see a published approximate mortgage processing time of two to six weeks. But as countless homebuyers have discovered over the past year or so, actual processing and underwriting times can be much longer than this.
In fact, it is not uncommon for a mortgage application to drag on for as long as 12 weeks.
During which, there is every possibility that the applicant in question will find themselves beaten to the punch by a competing bidder. Everything seemed to be in place, a good price was agreed for their current property and they found the home of their dreams at a price they can afford...only to be pipped at the post due to administrative delays.
Sadly, this is an eventuality that has become more commonplace than most realise. In fact, research suggests that as many as two in every five homebuyers are missing out on property purchases, as a result of delayed mortgage applications.
“With two in five home buyers losing out on their property purchases due to mortgage delays, the importance of being able to move quickly is obvious, from the borrower’s viewpoint – and they can do that with a bridging loan,” commented Mike Collins, an experienced mortgage broker.
“Interest rates on bridging loans are higher than other finance products and I’ve been asked a lot recently whether now people should be worried that interest rates have increased,”
“The simple answer is that a bridging loan is typically paid back in a few months, making the interest more controlled and therefore, the loan more affordable. Below I’ll explain more about bridging loans and why they can be useful in the current climate.”
A Flexible, Fast-Access Alternative
The prospect of having to start again from scratch when moving house is enough to send a collective shiver down the spines of millions of homeowners. But with such frenzied competition at all levels on the UK housing market, it’s a cut-throat world where nothing is set in stone.
Until the transaction on a property has been completed, it could easily fall through at any moment.
This is one of many reasons why bridging finance has become a popular alternative to conventional mortgage loans. With bridging finance, a secured loan is taken out against the homeowner’s existing property, typically at an LTV (loan to value) of up to 80%. This money is used to purchase their next home and the full balance is repaid when their previous home sells.
But what makes bridging finance different is the speed and simplicity with which the facility can be arranged. Whereas a standard mortgage application can drag on for several months, a bridging loan can be accessed within a few working days.
This effectively affords the borrower all privileges and advantages of a classic cash buyer. They ‘cash out’ the equity tied up in their existing home, pay for their next home in cash and beat all competing bidders to the punch in doing so. They opt out of the traditional property chain entirely and eliminate the risk of being ‘gazumped’.
Charged at a rate of around 0.5% interest per month, a bridging loan can be extremely cost-effective when repaid promptly. It can also be just the thing to eliminate the prospect of the home of your dreams slipping through your fingers.
Best of all, bridging finance is open to individuals (and households) with imperfect credit, no formal proof of income and other ‘blips’ in their financial backgrounds. Just as long as the lender is confident the loan will be repaid within a few months when the borrower’s home sells, there is a good chance they will qualify for a competitive deal.
For more information on any of the above or to discuss the potential benefits of bridging finance in more detail, call anytime for an obligation-free consultation.