In recent years, the bridging finance sector has moved away from non-status, purely asset based loans
Yes the quality of the security is vitally important, but there are now many other considerations that the broker and their clients have to take into consideration.
Below is our step by step guide for ensuring that a bridging loan application goes through smoothly and successfully.
Step 1: Know yourbridging lender
Each bridging loan company tends to focus on different types of loans or favour a specific type of security. Some like big ticket commercial properties, others FSA regulated smaller loans. Remember the lender’s product guide often implies that they lend against anything to anyone, rarely is this wholly accurate. Know the lender’s sweet spot and you are far more likely to get a positive outcome.
Step 2: Submit a one page summary document
No bridging company wants or expects a long winded deal summary but a single page document with the keys points helps everyone. This summary should consist of the background to the deal, details of the security available, reason for the bridging loan and the exit route. Not only does it provide the underwriter with the key information in an easily readable format, but more importantly shows that the applicant and their adviser have thought carefully through not just the reasons for the bridging loan but also the repayment method.
Step 3: Get your information correct upfront
There is no worse way to start a case than for the underwriter to find out that important information regarding the case is incorrect. It amazes me how often the most basic information is missing from the application form. Yes, the sooner the application is in the sooner the work can start, but it is much more sensible to take the extra twenty minutes to ensure all the required information is included.
Step 4: Accurate estimate of the valuation of the property
The applicant should have a good estimate of what their property is worth. When properties are down valued by 20% or more it means that either the valuer is from a different planet, which does occasionally happen, or more likely the applicant has submitted a grossly enhanced value on their application form. This not only causes delays but often means that the credit committee will lose confidence in the competence of the applicant.
Step 5: Identify problems upfront
Bridging finance is expensive and is used for a reason. Often the applicant tries to hide these reasons and thinks that no-one will find out about their poor credit history or defective property. Almost always these details surface during the underwriting process and if disclosed upfront could have been dealt with then which would lead to a quicker and smoother underwriting process.
Step 6: Pick a good solicitor
It must be one of the most false economies that exist. The applicant is spending thousands, sometimes tens of thousands of pounds on a bridging loan, but try to save a few hundred pounds by instructing a sub-standard solicitor who is not sufficiently experienced to deal with these types of transaction. The saying that you “get what you pay for” is often true when you are deciding which firm of solicitors to use.
Step 7: Submit backing evidence to the valuer
If the applicant has strong evidence to back up their estimated valuation then they should provide this to the valuer prior to the valuation taking place. A valuer is much more likely to take into consideration evidence to support the applicant’s estimated valuation when they receive it upfront. Once the valuation report has been submitted to the lender then it is much harder for the applicant to persuade the valuer that their figure is correct and the valuer should amend his report.
Step 8: Respond promptly to requests for additional information
The underwriter will require various additional information from the applicant before the loan can be signed off. Ensure that this is provided promptly. If you have no urgency in providing the underwriter with this information then human nature often takes over and makes the underwriter think that there is no urgency with the transaction.
Step 9: Ensure you have a full list of outstanding information from the underwriter
Every professional bridging loan company should provide the broker a list of requirements upfront. As the valuation and legal work progresses, additional items may be required but always ensure you get a list of requirements within the first 24 / 48 hours of submitting a case. This allows the broker to immediately obtain these items and avoids unnecessary delays at the back end of the process.
Step 10 : And most importantly, be polite!
It always amazes me how many applicants and brokers are rude or unnecessarily aggressive with the underwriter. Everyone understands that bridging loans are time sensitive and even the slightest delay can lead to the applicant losing a considerable amount of money or, on occasion, even their family home. For such an important matter you want the underwriter to be on your side and not thinking what a rude so-and-so you are.
I very much hope these points help, and please keep submitting those cases!