Short Term Lending: An Alternative to Bridging

 

What do you do when an older retired client calls and asks you how they can downsize without selling their old home first? Do you a) sigh and put the enquiry on a post-it note at the back of your desk, b) drop everything you are doing and enthusiastically start researching the market, c) pass the enquiry to a packager or d) pass the enquiry to a bridging provider?

 

If you’re in the enthusiastic group, then that’s great; add us to your list of options. If you are in any other group, then why not allow us to spend a few minutes telling you about our short-term lending product. We think you’ll like it.

 

The Furness Building Society short-term lending product is a serviced interest only product which lasts two years, although as it has no ERC’s it can be used for shorter periods. It is ideal for those customers who have identified a property but for whatever reason are not going to be able to sell their old one first. It is substantially cheaper than bridging, and we can lend 100% of the purchase price, subject to a maximum LTV of 60% across both properties. If the loan can be supported on one property alone then we’re happy to use just the new or just the old property as security. We can even split the loan so that there is a capital and interest repayment portion on the new property over a longer time-frame (subject to the mortgage being redeemed by age 80) and the short-term lending product can be secured on the property which is to be sold.

 

As the loan is serviced, we will need to undertake an assessment of affordability, but the short-term lending product is interest only and as the repayment strategy is ‘sale of property’, we do not need to include the cost of a separate repayment strategy within the affordability calculations.

 

At the Furness we have two product options: a variable rate currently of 4.99% with a £1499 fee, and a variable rate currently of 5.79% with a £499 fee. There are no ERCs at any time with either product. Full details (including APRC figures) are available here.

 

The product is suitable for a variety of purposes, but one of the biggest potential client groups is the older borrower, who is looking to downsize. The attached case study tells you all about Anne, a recent widow marooned in an oversized family home, who sees her dream bungalow. We’ve already helped lots of people like Anne with this product and we would love to talk to you about how we can help your clients too.

 

Case Study

 

Anne Jones is a sprightly and independent 77-year-old. Sadly, husband Keith died last year after a lengthy illness and she’s still adjusting to a very different life.

 

Anne lives in a large 4 bedroomed detached in a nice village. She has lived in her home for 40 years, but since Keith died she has realised that it is too big. She would like to downsize but is in no hurry as she wants to find the right property. She is determined to stay in the village, near her family.

 

Unexpectedly, a bungalow has just come on the market nearby, and it would be perfect for her future needs. The difficulty is that as there are only a handful of bungalows in the village, it is going to be in huge demand, and her house isn’t even on the market. In fact, it’s not quite ready to put it on the market; she is keen to do some jobs on it first to maximise its sale potential. It’s all happened a bit too quickly, and Anne now feels stressed by the whole idea.

 

Anne could consider bridging finance. However, she hasn’t had a mortgage for over 20 years, and is scared by the idea of bridging, not least because it feels as though she would then be pressurised to sell the old house very quickly to keep the costs down.

 

Fortunately for Anne, she approaches a broker who tells her about a product which Furness Building Society offers. The Furness will lend Anne all the money she needs to buy the bungalow, so long as the loan represents no more than 60% LTV. She can even provide both properties as security if that helps. The product is for two years, which will allow Anne to move at her leisure, and do some work on her old house first. By separating the purchase from the sale, Anne knows that she can deal with one thing at a time, and can move gradually as it suits her, which is a huge emotional benefit for her.

 

Best of all, the product has no roll-up of interest and is priced keenly against bridging options, meaning that Anne doesn’t need to worry about spiralling debt. It will all remain within her control, and will be affordable for her.

 

Anne tells her broker that she is delighted with this option; it’s a real weight off her shoulders. Her broker calls their Furness Business Development Manager to talk the case through, and the application progresses swiftly through, meaning that within a few weeks Anne is the owner of two properties, and can start to plan her new life.

 

If you’d like to talk to us about any enquiries which you may have, give our Broker hub a call and speak to a BDM on 0800 988 1561

 

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