Do You Really Know Bridging? Gary Lederberg and Steve Spragg

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1 Do You Really Know Bridging? Gary Lederberg and Steve Spragg

2 Introducing Affirmative Finance Established in 2004 Now In our 13 th Year of Operation Fast Short Term Property Finance Development Funding Specialists Authorised & Regulated by the F.C.A. MCD compliant On site Legal Team No Up Front Fees Fully committed to service Creative and Flexible Approach Advanced systems in place Member of the Council of Mortgage Lenders Patrons of the NACFB Associate Lender of the AOBP

3 The Affirmative Group of Companies

4 So What is Bridging Finance? Fast Short Term Finance taken out to facilitate a transaction A loan / mortgage secured against a residential or a commercial property or land By way of a 1 st or 2 nd charge taken against a new or already owned property, or even a combination of both Much, much, quicker to arrange than a traditional mortgage A normal transaction taking 7-10 working days from first enquiry to completion

5 Who Needs Bridging Finance? People wishing to purchase a property before they have sold their existing home People who purchase property at auctions Buy-to-let investors negotiating discounts for quick completion Entrepreneurs who need money quickly in order to fund a new opportunity Property developers seeking to buy, develop and sell a property or properties quickly Unmortgageable properties e.g.no bathroom or kitchen

6 Overview of Criteria No change since Brexit From 10,000 upto 2,000,000 (loan size) LTV 70% (upto 75%) (1 st charges) LTV 60% (upto 65%) (2 nd charges) 100% finance with additional security England, Scotland and Wales 12 months (upto 18 months) Staged facilities interest only charged on monies drawn Retained interest Pricing

7 Question: Do landlords have their heads in the clouds when it comes to their portfolios?

8 26% 32% 42% Unencumbered Lowly geared Highly geared Does anyone know what these figures relate to?

9 58% Which means that..of all properties can be utilised for bridging finance!

10 What type of Landlords do you deal with? Professional Landlord Limited company Small portfolio holder The Accidental Landlord Here is an example of how to utilise the banker property..

11 How to Utilise the Banker Property Auction Guide price - 35,000 Unencumbered BTL Val - 100,000 In need of repair 6,500 41,500 41,500 = 31% LTV Target Property GDV - 85,000 41,500 requirement 50% remortgage to clear Bridge Banker Property 30k+ equity / profit

12 The Frequent Flyer Programme 16k 9k 27k 33k Banker Property 8K 40k 15K 12K 11K 7k 38K 42K

The Refurbishment A developer wished to buy a group of 12 ex-mod properties for refurbishment and onward sale, plus adjacent land The purchase price was 925k the developer had 200k cash and a 300k

13 The Refurbishment A developer wished to buy a group of 12 ex-mod properties for refurbishment and onward sale, plus adjacent land The purchase price was 925k the developer had 200k cash and a 300k mortgage on his own residential property valued at 900k Refurbishment costs were approximately 10k per unit He sold 6 of the properties for 150k each and retained 6 as BTLs The client split the title and obtained planning permission for 8 additional properties on the development We helped him with the development funding for the 2 nd phase of this development

Purchasing at a Discount A Bristol buy-to-let investor was offered 3 flats in a local development at 15% discount Only if he completed in the next 7 days A conventional BTL mortgages would take far

14 Purchasing at a Discount A Bristol buy-to-let investor was offered 3 flats in a local development at 15% discount Only if he completed in the next 7 days A conventional BTL mortgages would take far too long to arrange The client contacted us and we agreed the deal within 2 hours After receiving verbal acceptance, a valuation was instructed and received the next day Completion took place 3 days later, only 5 days between first enquiry and completion The original selling price of the 3 units was 750k, offered to the client for 637.5k The investor had 2 unencumbered properties valued at 200k each in his portfolio Which means we funded 100% of the purchase price With the client s additional security we financed a further 40k to enhance the properties His mortgage broker arranged BTL take out mortgages completing 6 months later

The Auction Purchase A builder bought a project house for 125k at auction The builder s own property was valued at 250k with a mortgage of 80k We arranged a bridging loan as follows:- 1 st charge of

15 The Auction Purchase A builder bought a project house for 125k at auction The builder s own property was valued at 250k with a mortgage of 80k We arranged a bridging loan as follows:- 1 st charge of 87,500 (70%) of the auction property - A 2 nd charge on his own property of 60,000 to fund the purchase, plus refurbishment costs and 6 months repayments of the loan 6 months later, the house valued at 225k, it was re-mortgaged for 168k and the bridging loan repaid

16 Development Funding Case Study Agreed to lend 319,000 (100% of the build cost) Released in stages Monthly interest payments retained (1.35% pcm) 12 month term 1 st charge on land purchased for 225,000 with a GDV of 675,000 per valuation Profit c. 125,000

17 Month 1 52,000 initial advance (LTV = 23%) 225,000 valuation Case Study Stage 1

18 Month 2 Case Study Stage 2 52, further advance (Total 104,941.18) (LTV = 47%) 225,000 valuation Artist s impression

19 Case Study Stage 3 Month 5 72, further advance (Total 177,566.88) (LTV = 65%) 275,000 valuation

20 Month 9 14, further advance (Total 192,000) (LTV = 70%) 275,000 valuation Case Study Stage 4

21 Month10 60,000 further advance (Total 252,500) 370,000 valuation Case Study stage 5

22 650,000 end value Completed Sold - 635,000 Case Study Final Stage

23 Loan to Value Calculation Less Fees per release Less Date Gross Loan Released Gross loan running total Arrangement / Broker Legal Months of term remaining Monthly instalment on drawdown Monthly instalment (running total) Interest to end of term Net loan received by borrowers Total Property Valuation Other Borrowings LTV Month 0 52, , , , , , , % Stage 1 Month 1 52, , , , , , % Stage 2 Month 2 72, , , , , , % Stage 3 Month 3 14, , , , , , % Stage 4 Month 4 60, , , , , , % Stage 5 252, , , , , , , ,

24 Loan to Value Calculation 1 Main structure is defined as a structure comprising of walls and roof. The MSMV assumes all necessary certification is in place to comply with building regulations and NHBC or similar guarantees; and that the whole site is suitable for acquisition by another developer, unencumbered. 2 First fix comprises all the work needed to take a building from foundation to putting plaster on the internal walls. This includes construction of walls, floors, ceilings and inserting cables for electrical supply and pipes for water supply. 3 Second fix comprises all the work after the plastering to a finished house but not decorated. Electrical fixtures are connected to the cables; sinks and baths connected to the pipes, and doors fitted into doorframes. 24

25 What We Want To See Application Form Valuation Build costs and timeline (schedule of costs / works) Planning permission Building regulations consent NHBC or other insurance Viable exit strategy within the term of the loan (crucial) A clean legal title

26 The Application Process Call a member of our Underwriting Team on Complete the DIP (available on our webpage and then send it back either by or fax On receipt of the DIP we will issue an offer letter. When verbal or signed acceptance is received, we will instruct the valuation and inform our on site legal team All Regulated Mortgage Contracts must come through a regulated Mortgage Broker

27 Our Key Lending Areas FCA Regulated Self Build Development Funding Land with Planning Unmortgageable Properties Auction Purchases Barn Conversions Refurbishment Finance 27

28 So Why Use Affirmative? We have over 120 years of collective underwriting experience We have our own on site Legal Team Specialist Bridger / Short Term Finance Provider Specialist Auction Finance Provider Specialist Development funder Secure long term client relationships Affirmative Finance is an established name in the Fast Short Term Finance Market We promise to do everything in our power to find a solution Affirmative s record is 4 hours! Remember what can be more Positive than an AFFIRMATIVE answer!

29 New Interactive Website

30 Affirmative on the MOVE.

31 Any questions?

A Broker s Reference. Bridging Finance

A Broker s Reference. Bridging Finance A Broker s Reference Bridging Finance 3 Introduction 5 What is a bridging loan? 6 How do bridging loans work? 8 When would someone need a bridging loan? 10 What property types can bridging loans be secured