OK, maybe after-dinner discussions are stretching it a bit too far, but bridging certainly has to be one of the most obvious alternative income streams for the mortgage broker.
In fact, I’d say that bridging dovetails so perfectly with the mainstream mortgage and property markets that it shouldn’t even be referred to as an alternative income stream – it’s integral rather than alternative.
Bridging is the perfect solution for so many residential scenarios, from broken chains and auctions to downsizing and freeing up cash from equity quickly – for any purpose.
The fact that bridges, even for multi-million pound deals, can be arranged in a matter of days makes them all the more valuable a tool. They’re fast, bespoke and extremely flexible.
With the commercial property market much improved these days, bridging is now being used a lot more in that area, too.
An ever-growing number of brokers are turning to short-term loans to oil their clients’ commercial property and development portfolios.
As with resi bridges, commercial loans can be used to solve no end of problems, from mainstream lenders calling in their loans to investors seeking to capitalise quickly on new opportunities but where the finance isn’t yet in place.
So what rates are being charged on bridges, these days? Clearly this will vary according to the lender, credit profile of the borrower, LTV and type of security, but residential rates range from 0.75%pm to 1.25%pm, and commercial rates range from 1%pm to 1.5%pm.
And what, as a broker, can you expect to be paid? On both residential and commercial bridging loans, commission levels will naturally vary but expect to receive in the region of 1%-2% depending on lender and loan type.
In summary, bridging finance is a powerful tool for both commercial and residential property investors, giving them an all-important cash injection before they refinance or receive funds from another source.
As their broker, you’re in the perfect position to introduce clients to its myriad uses.
Mark Posniak is head of sales and marketing at Dragonfly Property Finance