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
Additional Information
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
Victoria House
Lowside
Outwell
Wisbech
PE14 8RE
01945 773945
*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.
MORTGAGES
Whether you are a first-time buyer, looking to sell up and move on, purchase a second home or even re-mortgage – no matter what your circumstance - Top House can help. And make things even easier, we will not only liaise with your chosen mortgage provider, but also with your solicitor and estate agent.
Our aim… to make your transaction as stress-free as possible.
We will work with you to fully understand your exacting requirements, enabling us to offer you completely personalised options, ensuring you choose the mortgage that is right for you.
Priding ourselves on our mortgage knowledge, we offer practical solutions and excellent customer service. Our client relationships are long-term; looking after you from start to finish, updating you every step of the way.
Types of Mortgage
There are so many different types of mortgages on the market it can be a minefield trying to determine which is best, so let us guide you through the various options out there.
Standard Variable Rate (SVR)
This varies from lender to lender; each with their own standard variable rate (SVR) that can be set at whatever level they want and change by any amount at any given time - especially if there are rumours of the Bank of England base rate increasing in the future.
In November 2020, the average interest rate on a 2-year fixed rate mortgage was 2.53%, while the average SVR was 4.44% - meaning repayments on a SVR mortgage could be far more expensive.
An SVR is higher than most mortgage deals currently on the market, so if you're currently on an SVR, it's definitely worth shopping around for a new mortgage.
To find out more, get in touch with our team of specialist advisers at Top House.
Fixed Rate
A fixed-rate mortgage means you pay the agreed interest rate – regardless of interest changes elsewhere - for a set period of time. You will know exactly how much you need repay each month.
There are usually far more fixed-rate mortgages available than any other type of deal, albeit this number of has fallen significantly since the start of the COVID-19 outbreak.
The most common terms are two-and five-year deals. At the end of which you'll usually be moved on to your lender's standard variable rate (SVR).
Discount
A discount mortgage means you pay the lender's standard variable rate (a rate chosen by the lender, that rarely changes) with a fixed, discounted amount.
For example…
If your lender's standard variable rate is 4% and your mortgage came with a 1.5% discount, you'd pay 2.5%.
Standard variable rate 4% - Discount 1.5% = 2.5%
Discounted deals can be ‘stepped’ – this means that if you take out a three-year deal but pay one rate for six months and then increase the rate for the remaining two-and-a-half years.
Some variable rates have a 'collar' – a rate below which they can’t fall – or are capped at a rate that they can’t go above.
Top House can help you with these features when choosing your deal.
Tracker
A tracker mortgage, ‘tracks’ the Bank of England base rate, which currently stands at 0.1%.
For example, you might pay the base rate plus 3%
Base rate 0.1% + 3% = 3.1%
In the current mortgage market, you'd typically take out a tracker mortgage with an introductory deal period, usually of 2 years. After that period, you would be moved on to your lender's standard variable rate.
However, there are a small number of 'lifetime' trackers where your mortgage rate will track the Bank of England base rate for the entire mortgage term.
Capped
A capped rate mortgage moves in line with the lenders standard variable rate (SVR), but being capped means the rate wont increase above a certain level.
Offset
An offset mortgage is where you have savings and a mortgage with the same lender and your cash savings are used to reduce – or 'offset' – the amount of mortgage interest you're charged.
Specialist
Everyone’s circumstances are different and for some it may mean that you need a specific type of mortgage.
Self-Build
There are two main types of self-build mortgages - arrears stage payment and advance stage payment.
Most commonly, funding will be released in stages after the construction of each section is completed. A valuer will normally visit the site before the payment is released. With an arrears stage-payment you may need a loan to cover the work before your mortgage is released, so you must factor this into your decision.
Sometimes it’s possible to get a self-build mortgage where the lender releases the money before you pay each bill. This is not usually offered by mainstream lenders so you may be limited to specialist providers.
Self-employed
Without an employer to vouch for your income, being self-employed means you’ll need to pass the lender’s affordability tests in the same way as any other borrower by providing additional evidence of your income than other borrowers.
First time buyer
As a first time buyer it can be difficult to save enough money to qualify for a mortgage, so help get on the property ladder, the Government schemes in place to help buy your first home.
‘Help to Buy’ can assist you getting a mortgage with a small deposit – they offer equity loans, meaning that when they lend you money, you can use that towards your deposit and repay it later.
‘Shared Ownership’ offers shared ownership – you buy a share of your homes value (between 25-75%) and pay rent on the portion you don’t own. This enables you to purchase a home with a smaller mortgage, which in turn means a smaller deposit too.
‘Lifetime ISA’ – if you are over 18 and under 40, you can consider a Lifetime ISA – this government incentive helps you buy your first home and save for your future. Under the rules, you can add £4,000 a year into the ISA until you are 50. The government adds a 25% bonus to the money you save yourself, to a maximum of £1,000 per year.
Retirement Interest Only (RIO)
Retirement-interest only mortgages (RIOs) are a relatively new set of products designed to help older borrowers who may struggle to get a standard residential mortgage. They allow you to borrow against your property and only pay back the interest (and not the loan itself) each month.
Buy to Let
Property is a great investment and with the If you are seeking rental yield or capital growth, property is great investment - especially given the lettings market – and a Buy-to-Let mortgage
Bridging Loan
A bridging loan is a short-term finance option for buying property. It 'bridges' the financial gap between the sale of your old house and the purchase of a new one.
If you're struggling to find a buyer for your old house, a bridging loans could help you move into your next home before you've sold your current one.
This would mean that you'd own two properties for a short time, potentially leaving you with a large amount of secured debt if it takes a long time to sell your existing property, if the buyers withdraw completely, or you sell your home for less than you expect.
Re-mortgage
If your current deal is coming to an end – or if you haven’t changed lender in a while – now is the time to think about changing to a more cost-effective mortgage deal.
A mortgage is a loan secured against your home. You home may be repossessed if you do not keep up repayments on your mortgage or another other debt secured on it.
John Cobbold
I’ve worked in Financial Services for 40 years and have considerable experience in Later Life Lending, Equity Release and Lifetime Mortgages.
I am a Qualified Member of the Chartered Insurance Institute (CII), The London Institute of Banking & Finance (LIBF) and The Equity Release Council (ERC).
Amongst my qualifications, I hold Cert CII (MP) a CII Mortgage Professional; LIBF Adv CeMAP the Advanced Certificate Mortgage Advice & Practice and LIBF CeRER the Certificate in Regulated Equity Release.
During my career, I have 10 years mortgage broking experience and a further fifteen years as a Regulatory Supervisor for the Mortgage Code Compliance Board (MCCB), the Financial Services Authority (FSA) & Financial Conduct Authority (FCA) before joining The Equity Release Company colleagues of whom I have known for over 15 years and feel privileged to work with.
Equity Release schemes are only one of the ways to help self-finance long-term care.
Make sure you’ve considered all the alternatives, such as selling your property to downsize to a cheaper one or using savings to buy an annuity that will cover your care costs.
Consider grants or subsidised loans if you’re raising capital for home improvements or modifications.
Discussing your plans with your family can help to manage their expectations about inheritance and avoid any disputes later. They may also be able to come up with alternatives.
Enquiries & Next Steps
Done that and would like to know more or to proceed to call The Equity Release Company on 01702 908450 or email John Cobbold on [email protected] one of our Equity Release specialists who can provide you with the latest information personalised to your circumstances – with no-obligation.
Visit The Equity Release Company Website at theequityreleasecompany.co.uk
