Why switching to another product with the same lender is a smart move

Article provided by Kate Cowan, Chief Financial Officer at Hope Capital for use in Bridging & Commercial.

Countless lenders and various products can make it feel like quite the challenge for a broker who is looking to source the best bridging loan option for their client. Even when the borrower has secured an initial line of funding, it then becomes an entirely new obstacle when they are looking to obtain an additional loan if their existing facility has reached the end of its term, or they want to embark on a new project.

This is particularly beneficial for a borrower who has secured a winning bid when raising their paddle at auction and then needs to find a loan to undertake refurbishment works. This is a situation most people find themselves in when looking to achieve a nice profit from an auction purchase.

The main thing to consider if your borrower is interested in buying at auction is that on most occasions, they will be required to complete the purchase within a 28-day time frame. As a result, funds to purchase, and often renovate, are needed extremely quickly. Compared to traditional, long-term financing options, such as mortgages, bridging lenders are much more likely to be able to meet this timescale and are also very flexible about the types of property the borrower is looking to purchase, as well as their individual circumstances.

So, not only does a bridging loan provide extremely fast turnaround times, flexibility, customised solutions and quick decisions for this purpose, but it also offers a significant number of other benefits for borrowers who are looking to switch over to a new loan after placing a winning bid.

In most situations, auction properties are often in a state of disrepair, e.g. a house without a bathroom or kitchen. Therefore, a refurbishment loan provides the ideal solution to complete the necessary works. However, often brokers think the best option to achieve this is to move to another lender.

Of course, there are multiple lenders to consider, however if your client is aiming to retain flexibility, and avoid unnecessary hassle, it could make sense to stick with their current bridging loan provider by moving onto another product. At Hope Capital, there are many benefits of switching including free lender legals, no ICR calculations, no early repayment charges, reduced facility fees, to name a few benefits.

Ultimately, a product switch is pretty simple. In most cases, the transfer can be arranged very quickly, with some borrowers being able to switch their deal in a matter of days. It’s also ideal for borrowers looking for surety of exit with their bridging funding, those who want to refinance assets without immediately tying themselves into long-term lending contracts with large ERC’s and borrowers who may need more time to re-build their credit before refinancing with a more mainstream/high street lender.

With so much to think about, it can be helpful to get advice from an expert. At Hope Capital, our team has a significant amount of experience working with brokers and borrowers alike who are looking to switch to a new loan and achieve the outcome they’re looking for.