PHLS Mortgages : Mortgage Broker Advisor in Maidstone Kent

Bridging Loans

We work with specialist bridging loan providers for clients looking for short-term finance to facilitate refurbishment projects as well as other scenarios that require short-term lending such as:

• Refurbishment projects where the property isn’t in a good enough condition to be mortgaged by a conventional lender. Once the refurbishment has been completed you can look to remortgage to a normal mortgage and repay the bridging loan.
• If your chain breaks down a bridging loan can be used to temporarily replace your deposit for your onward purchase. The loan bridging loan can then be repaid once the property eventually sells.
• If you are buying a property at auction and you need to raise funds quickly. Again, you can look to remortgage to a high street lender later and repay the bridging loan.
• For self-build projects a bridging loan can help cover the cost of buying the land and/or building work whilst you apply for a mortgage.

How do Bridging Loans work?

With bridging loans there usually isn’t a fixed end date but instead, you will be expected to pay the loan back usually within 12 months. When applying for the bridging loan the lender will want to see that you have a clear exit/repayment strategy such as refinancing the loan. For example, remortgaging to a residential or buy-to-let mortgage. Another strategy could be renovating a property and then selling once the works are completed to repay the bridging loan.

Bridging loans are priced monthly instead of annually as they are taken out by people on a short-term basis and are looked to be repaid early.

As they are quick and convenient loans seen with a higher element of risk than normal buy-to-let or residential mortgages the costs associated with bridging loans can be high regarding set up and arrangement fees along with varying valuation fees.

Penalties can also be applied if you go over the agreed time for repaying the loan. These vary from lender to lender and need to be fully reviewed and understood before taking out the loan.

Instead of being repaid monthly, the interest is ‘rolled up’ and repaid at the end of the loan along with the other fees and charges.

Bridging loans are offered by specialist lenders and we can offer expert advice and work with the lender on your behalf to fulfil your potential bridging needs.

Self-Build Mortgages

Unlike conventional residential or buy-to-let mortgages where the money from the lender is released in one payment at completion, the funds for a self-build mortgage are released in stages.

These stages typically consist of:

• Buying the plot of land
• Foundations complete
• Wall plate/frame erection
• Wind and watertight.
• First fix
• Second fix
• Completion

Advance Stage or Arrears Stage Payment?

Although the stages are usually the same the funds can either be released before each stage which is called “Advance Stage Payment” or after each stage which is called “Arrears Stage Payment”. For the funds to be released, each stage of building work will need to be signed off by a qualified surveyor.

If going down the route of arrears stage payments, then you will need to make sure that you have enough funds to complete each stage of the build and the lender will then reimburse you once complete.

The more conventional method is the advance payment route as the lender will provide you with the funds to complete each build stage meaning less financial pressure is put on yourself.

Please be aware that different rates will be offered by lenders depending on which of the above payment methods your circumstances allow.

Applying For a Self-Build Mortgage

Affordability for self-build mortgages is calculated in a similar way to conventional residential mortgages as personal income, outstanding credit commitments plus some other factors are used to work out a maximum loan amount.

The loan can be used to cover the cost of buying the land but be aware that the land must come with some form of current planning consent for the application to be approved.

In terms of interest rates, you may find that rates vary depending on whether the loan is to use an arrears cost or advanced stage payment method.

When applying for a self-build mortgage you will need to complete detailed costing information and submit this to the lender so that they can base the applied for lending on these costings. The lender will use their costings team to go through the building estimates etc to make sure that the project can be completed for the estimated cost provided to you usually by the developer/builder.

Once the costings have been approved by the lender you will then agree on the amount of funds released at each stage of the build.

It is now time for you to schedule when works begin, and constant dialogue will be open between you and the lender in terms of inspection of each stage and the release of funds.

Remortgaging to a “Highstreet” lender.

Most of the time self-build mortgages are on an interest-only basis to keep the costs down during the building stage and to offset the higher interest rates that usually come with self-build mortgage loans.

Once the build is completed it is strongly advised that you look to remortgage and refinance the loan to a high street/conventional lender to come away from the self-build lender’s high-interest rates and typically this also means switching over to a repayment mortgage so that the loan amount is paid off during the mortgage term.

Please be aware that this is subject to affordability and your circumstances at the time of application.

Let To Buy Mortgages

Whether you are looking to start a rental property portfolio or if you just can’t sell your property and fear losing out on your dream home as a result then taking out a let-to-buy mortgage may be the way forward for you.

If you are looking to set out on the journey to become a landlord and have built up enough equity in your residential property over the years, then you could look to remortgage onto a buy-to-let mortgage and take out the available equity for your onward residential purchase.

The let-to-buy side of things works in a pretty similar way to a buy-to-let purchase or remortgage. Firstly, we need to establish a valuation of your property and then the monthly rental income that could potentially be achieved.

Again, we can only apply for funds up to 75% loan to the value of your property and your current mortgage balance would need to be paid off with the let-to-buy mortgage and any additional funds left over can be used as a deposit for your onward residential purchase.

An example would be:

Property Value = £400,000                                               

Outstanding Mortgage Balance = £200,000

Let To Buy Mortgage Amount = £300,000

Funds Left Over for Onward Purchase = £100,000

Please bear in mind that the above is subject to sufficient rental income being achieved.

Once the let-to-buy and purchase have been completed you are left with a new home and your first foot on the rental property ladder!