More and more mortgage brokers are expanding into bridging, but for a first timer it can all seem a little confusing. So how does it all work?
Stage 1 – initial fact find
The application starts when a broker calls with an enquiry on behalf of a client. At this point, we take general details about the deal over the phone and conduct a basic fact find. For example:
• What type of property is the security?
• Where is it based?
• Who is the borrower?
• How much is the client seeking to borrow?
In effect, we’re getting an initial feel of the case. 90% of the time we will know during that initial phone call whether or not we will be able to secure the funds.
Importantly, we’ll also know at this point which lender will be best suited to the loan and which lenders won’t have an appetite for it.
As you probably know, some lenders like bigger loans, with no upper limit, others prefer smaller loans of as little as £30k. Some lenders prefer to lend within the M25, other lenders are happy to look further afield.
On some occasions the broker may ask us to call the client directly. This isn’t the broker being lazy, it’s just that some brokers are happy for us to deal directly with their client.
If we feel that we can help out, after the phone call we start by carrying out some initial credit searches on the client, as well as Land Registry searches. Effectively, we’re starting to piece more information together beyond the initial fact find.
Stage 2 – letter of intent
If the searches come back and are satisfactory, we will then issue a facility letter or ‘letter of intent’ to the client. This is similar to an agreement in principle offered by a mainstream lender, and is clearly subject to the valuation and legal searches.
We generally offer the letter of intent without consulting the lender that we have in mind for the loan, as we are very familiar with all the lenders’ underwriting processes and know whether or not they will lend on a deal.
If it’s a borderline case, we will, of course, approach the lender before the letter of intent is issued. We’ll talk it through with one of the senior underwriters and raise any queries.
At the same time that the letter of intent is sent, we will also send the client a pack containing all the lender’s documentation. As well as completing this documentation, the applicant will need to provide ID, proof of income and proof of address, e.g. a passport and utility bill.
At this stage we will also determine whether the client wants to proceed on a retained, or rolled-up basis, or is happy to service the debt monthly. The vast majority of clients choose to pay the interest on a retained or rolled-up basis (depending on which the lender offers).
Once the documentation is returned to us, we will be able to get a formal commitment from the lender and start processing the application in earnest.
Stage 3 – processing the application
If it’s a second charge, we will have to get a redemption figure from the first charge lender as well as a mortgage reference.
As you will know all too well, as soon as high street lenders come into the equation, things can slow up slightly but generally we’ll be able to get this information within a week.
It’s also worth pointing out that, with some lenders you need to get permission to take out a second charge, with others you don’t.
Stage 4 – the valuation
Presuming we secure the relevant consents from the lender (if they’re required) we will then get a valuation on the property. We will instruct a surveyor from the lender’s panel to carry this out, and they will generally report back to us within 24-72 hours. As ever, it depends on the surveyor, the lender and the urgency of the deal.
If the valuation is OK, we will submit the whole case file to the lender and the lender’s solicitor will produce a formal offer. This will be made to the client’s solicitor who will inform the client.
The client then signs and executes the paperwork. Once this is done, the lender will release the funds to its solicitor, who will pass the funds to the client’s solicitor who will then pay the funds into the client’s account.
How long a bridging loan application takes from first call to funds released will depend on a number of factors.
A vanilla first charge bridge might take under a week to arrange, and can often be completed in less than 72 hours if all the different parties are focused.
More complex second charge bridges might take 10 days or more to arrange, but again sometimes even they can take under a week if everything comes together.
It really does depend on the nature of the deal – and every deal, of course, is different.