As the name implies, a bridging loan is a short-term solution that ‘bridges the gap’ between finance – useful if you are looking to purchase a home before selling another, or if you are looking to buy property at auction and need to have the funds in place.
Two types of loan are available – ‘Closed’ loans have a fixed repayment date, ‘Open’ loans don’t have a fixed date, but as a short-term solution, it’s highly usual for them to be repaid within 12 months. Either way, as with all mortgages, lenders will require evidence of why the loan is needed and how/when it will be repaid.
When you take out a bridging loan, a ‘charge’ is placed on your property as security that your lenders are repaid as a priority, should you default or fail to repay your debt.
Those who own their property, mortgage-free, would take out a first charge loan, whereby the bridging loan would be repaid first if you fall behind on repayments.
However, if you have a mortgage on your property, it would be classed as a second charge loan. In this case, failed repayments would result in your home being sold off to repay your debts, with your mortgage taking priority.
Due to their nature of being short-term solutions, bridging loans are typically quite expensive, particularly when compared with normal annual mortgage rates, with fees of 0.5-1.5% every month, on top of which you should be prepared to pay lender set-up fees.
With regard to how much you can actually borrow, this can ordinarily be anything over £25k, but there is usually a limit of how much you can borrow – a figure based on the loan-to-value (LTV) mortgage ratio of 75% of the value of your property. However, if you are mortgage free and are taking our a first-charge loan, you may be able to borrow more than if you were taking out a second charge loan.
If a bridging loan is something you are considering, please talk to us – as independent, whole of market advisers, we can talk you through the options available to you – it may well be that there are alternatives options better suited to your own specific circumstances.
The very idea of finding a mortgage can feel overwhelming, especially if you are a first timer. At Top House, we have a wealth of experience and have drawn on that to provide you with a few ideas to help prepare you for your initial mortgage appointment.
As much as possible, try to think ahead and get your finances in order, paying special consideration to:
Monthly outgoings – what is your monthly expenditure? It is excessive? Can you cut out any unnecessary or luxury spending? Be honest with yourself and consider what you can actually do without.
Spending habits – record your spending as it’s important to have all the figures when you apply for your mortgage.
Credit rating – check for any monthly payments you are committed too and, to improve your credit rating, consider setting up direct debits on regular outgoings such as credit cards and utility bills. Also make sure you are on the electoral roll as this helps lenders conduct their background checks.
As well as paying a deposit and monthly mortgage repayments, you will need to make allowances for additional monthly costs such as utility bills, insurance etc. It may be an idea to start saving for them or to get used to having the additional expenditure, coming out of your account each month.
Setting up a savings account with restricted access is a good way to stop you spending, start saving and make you more aware of your spending habits.
Regularly reviewing your bank account can also help – where you notice there is excessive spending, with entertainment, food shopping, clothing for example, try to make savings. Maybe consider setting yourself sensible monthly budgets.
It is best to arrange a mortgage appointment before you even start looking for your dream home. As mortgage advisers, we are able to assess your finances and determine how much you can borrow; you can then tailor your property search to suit. Loan approval can also take a little time, so it’s best to get ahead of the game.
As brokers, we provide a ‘whole of market’ service, meaning we aren’t linked to specific lenders. Not only does this mean we can provide you with completely impartial advice, but we can also identify the very best offers and mortgage type* to suit your own specific circumstances and requirements. With regard to fees, we don’t currently charge for our services, however if the loan amount is below £125,000, a nominal fee of £199 would be payable upon completion.
Lenders will require various forms of documentation in support of any mortgage applications we make on your behalf, so it’s really helpful to have this prepared prior to our initial appointment.
The more information you provide, the quicker we can get you moving – you will need:
Proof of Identity
Proof of Income
Proof of Address
Please note that you will need to provide original documents – copies will not be accepted.
As soon as you’re ready and we’ve had our initial meeting, we will provide you with a few a few options for comparison, talking you through fully so that you can make a fully informed decision. Once your preferred mortgage option has bee chosen, we will collate all the required documentation and submit it, along with your application, to the lender. The lender will then assess your application. While they are doing this, it may be possible to obtain a pre-approval letter, comprising an estimate of the loan value – this will help show you are a previous buyer and will help your start your property search. Once you have a formal offer from the lender, your mortgage will be in place and ready to go. If, for any reason, the initial application isn’t approved, we’ll simply look at other options.
As well as mortgages, we are also able to offer second charge loans and insurance, including:
If you need any additional help and advice, or wish to book an appointment with a member of our experienced team, please get in touch:
Top House Mortgage Solutions
*Mortgage types include
For more information about mortgage types, please visit our website – https://www.tophousemortgages.uk/mortgages/
It allows people aged 55+ to release money from the property they live in, without the worry of having to make monthly repayments. It can be used to withdraw money – either as a lump sum, or smaller, regular withdrawals – against the value of your home; allowing you to remain in your home AND raise money.
This can prove fundamental for some; reducing the financial worries sometimes faced by those in retirement.
If this is something you are considering, an equity release plan will need to be drawn up, but before that, there are several things to consider, aided with a list of pros and cons that are based on your personal circumstances... something our specialist team will be able to talk through with you, weighing up your options, any tax or benefit implications, along with the benefits.
While there is no real reason why equity release should affect your tax position, it could affect any benefits you are currently entitled to. For example, if any of the Equity Release loan is kept as cash savings, this may well take you over the threshold that entitles you to certain benefits.
Be sure to assess your personal circumstances and equity release needs fully. Discuss your requirements with an advisor and make sure you know all the facts, before making an informed decision.
Whatever your needs, there are various options available to you and, working together, we can help identify a plan that meets your needs.
A Lifetime Mortgage does not require monthly repayments (although some plans will allow you to if you so wish). You will remain the owner of your home for the rest of your life – the same goes if you are a couple; the surviving person will be able continue living in your family home, either until their passing or should they move into a care facility on a permanent basis.
At such a time, when the house is sold, the interest accrued over mortgage term will be added to the loan amount, and the total repaid by your estate.
A Home Reversion Plan gives you the opportunity to access part, or the full value, of your property, while still retaining the right to remain living in your property – rent free – for the rest of your life.
The plan provider will purchase all or part of your home, and based upon your age, health etc, will afford you either a lump sum – or again, regular payments – along with a lifetime lease. This lease guarantees you the right to continue living in your property, without having to pay any rent, for the rest of your life.
Both equity release options have variables that can be matched to your current and future needs, thus ensuring the plan in place for you.
The first step is to get some professional advice – please feel free to get in touch and speak with a member of our specialist team. Gather all the information you can, weigh up the pros and cons, consider the key features and any risks involved, and then discuss your options with your family. You should then be in the best possible position, to make an informed decision.
Money Saving Expert Martin Lewis has a informative guide to Equity Release on his website you may like to read by clicking the following link. Should you Equity Release?
Call us 01945 773945.
Are you struggling with mortgage repayments?
It’s fair to say that we have all been struggling with the financial uncertainty surrounding Coronavirus over the last year. Some have not been able to work. Income has been reduced. Living costs have increased and monthly finances have gone array.
Whatever the reason for you struggling to keep on top of your mortgage payments, you may have started to build up a debt… and you won’t be alone.
You may have missed one or more monthly payments or paid less each month than agreed, but whatever the reason, it is always best to get in contact with your mortgage broker or loan provider as early as possible.
If you know there’s going to be shortfall in your finances for a period of time, your lender may just be able to help – a ‘payment deferral’ would allow you to pause your mortgage payments for three months.
Our advice? Find out what you owe in total – your debt is only likely to increase if you don’t and we are all aware when it comes to mortgage repayments, you could end up being taken to Court and your home being repossessed.
But there are options out there, so don’t give up and hope the problem goes away. It won’t.
Instead, take the time to carefully consider what you could do to get back on top of the debt – draw up a budget to show your monthly income and outgoings, look at ways to cut costs and come up with some ideas of how you may be able to repay what you owe.
Once you've worked out a way of dealing with your debt, you will need to come to an agreement with your mortgage lender.
If you don't have any options for paying off your debt or can't reach an agreement with your mortgage lender, you should get help from an experienced debt adviser straight away.
Further advice on how to repay your mortgage debt follows…
Making extra mortgage payments
If you’ve got some money to spare each month, you may be able to pay back what you owe by making extra payments on top of your usual monthly mortgage payments.
To work out if you've got extra money to spare and how much, you will need to work out how much money you’ve got coming into your household each month and how much you need to pay out on bills and other expenses. This is called working out a budget.
When you've worked out your household budget, including any extra income you can earn, you'll be able to see how much money you have left over to pay off your mortgage debt. You will need to write to your lender and explain what you’re proposing to do.
Looking at your budget
If you've fallen behind with your mortgage payments, you will need to take a good look at your household budget. This will tell you if you've got any money left over which you can use to pay off your debt.
You will need to make a list of all the money you’ve got coming in and all the money going out of your household. This should include any other debts you owe. Make sure that the amounts you put down are realistic.
Think seriously about whether it's possible to increase the money you've got coming in or make cutbacks on your spending.
For example, you may be able to:
There are lots of different ways to boost your income and spend less on your outgoings.
An experienced debt adviser can help you work out how much money you’ve got to pay off a mortgage debt and any other debts you owe. They can also advise you about ways of increasing your income and spending less money.
Adding what you owe to your Capital
You might be able to clear your mortgage payments debt by adding the money you owe to your capital (the amount you borrowed) and paying it back over the remaining period of the mortgage. This is known as capitalising the arrears. You could also ask to extend the term of the mortgage in order to keep your monthly payments down, although you will end up paying a much larger amount in total.
Giving up your endowment policy
If you have an endowment mortgage, you could think about giving up your endowment policy or selling it off to an investor. This will provide you with a lump sum of money which you can use to help pay off the debt. However, you should think very carefully before doing this. You will need to find another way to pay off your mortgage loan and you will also need to find alternative life insurance cover. You will also need to find out whether there would be any penalties or other costs involved in bringing your endowment policy to an end.
Get independent advice first. You will need to write to your lender and explain how you're proposing to clear your debt.
You could see if it’s possible to take out a loan, or borrow money from someone you know, to help you pay off the mortgage debt. Don’t borrow money from someone you know unless you know them well and can trust them. Be careful not to borrow from loan sharks.
You will need to write to your lender and explain how you're proposing to clear your debt.
If you take out a loan, check whether you can afford the repayments by working out your budget. It may also be a good idea to get advice from an expert debt adviser first.
Personal pensions for those over 55
You could take some of your pension money to help deal with your mortgage debt if you’re over 55 and have a defined contribution pension. ‘Defined contribution pensions’ are pension pots that are built up over time through regular payments.
You should consider the following before taking out some or all of your money:
You should speak to a financial adviser before taking money out of your pension pot to pay off mortgage debt.
Mortgage Payment Protection Insurance
If you’ve lost your job or had a temporary loss of income, check whether you have mortgage payment protection insurance (MPPI). You may have taken a policy out at the same time as you got your mortgage or afterwards. The MPPI policy may cover your mortgage payments if you can't work because of unemployment or sickness.
There are lots of circumstances in which, even if you have a payment protection policy, it won't pay out. You will need to check the terms and conditions of your policy carefully to see if you are covered. You may need to get advice about this.
You might also like to read our blog: What is Equity Release?
Source: Citizens Advice Bureau