I took an enquiry for a bridging loan last week from a property investor who was disappointed when I told him he still had to pay stamp duty on his purchase. For the benefit of anyone else who has just returned from a prolonged stay on a desert island, the stamp duty holiday will be in place until 31 March 2021. However, for property investors buying additional residential properties over £40K the tax is still due, but with the threshold raised to £500k so there are savings to be made. Speak to your tax adviser for full details.
Bridging lenders are reporting substantial increases in activity since the lockdown was lifted and with some of the larger lenders either not yet back in the market or limiting their loan to values, others have been more than happy to pick up the slack.
Some bridgers are back to lending 75%, but most seem to be capping at 70% for residential loans. There is still a fair amount of caution on the types of deals some will take on although most of the enquiries we see are for light refurbs and we’re not having any trouble placing these.
If you have the cash to put down a decent deposit and the lender can use an automated valuation model (AVM) or desktop valuation, you should be able to secure a good deal for yourself and get the funds you need quickly.
For those wishing to use bridging for the first time to refurb a property and who need cash for the works, they will have read or heard the phrase, “borrow against the GDV” (gross development value) and wrongly believe they can borrow up to 75% for the purchase and 100% of the works cost and that the lender will advance all the money on day one. Well, sorry to disappoint you guys, that is not going to happen unless you have extra suitable security for the lender to take an additional charge on. The lender may grant a facility to cover the works, but this will be drawn in arrears. If I am not making this clear, ask your broker to explain.
When considering your exit strategy, be that to sell or possibly refinance to a buy to let, you may be able to get out within six months if you use the right lender. If you are looking for a full uplift in value to pull out your cash, make sure you understand how the lender may treat this before you start your journey.
Happy hunting.
