Bridging loans are increasingly becoming more of a mainstream lending product and there are growing opportunities for older people to take advantage of these products.
One of the reasons for this is that the mortgage market has changed substantially since the credit crisis struck in 2008.
Mortgage lenders have become more cautious and the Mortgage Market Review – also known as MMR – has had an impact. This review placed a strong emphasis on lenders taking into account the borrower’s ability to repay the loan.
In addition, the European Mortgage Credit Directive (MCD) has also had an effect on intermediaries and lenders.
However, bridging finance is largely excluded from the MCD despite the fact these products are now a mainstream offering.
Older borrows should find a bridging loan broker
They have grown in popularity because as lenders restrict their lending criteria which means mortgages and loans are more difficult to get, it has left a gap in the market for people who need to borrow substantial sums.
Indeed, many older people will have discovered that most High Street lenders will not make loans to people who are in retirement which means that they have to be more creative in sourcing lenders and meeting their requirements.
In many ways, bridging finance is a more useful route for older people to take if they are needing short-term finance but who may not meet the affordability criteria now being laid down by lenders.
The criteria which restricts access to mortgages and other financial products do not apply to bridging loans because interest payments are deferred until the loan is redeemed when the sale takes place.
How to find a bridging loan
For instance, with a promised mansion tax in the pipeline many older people may decide to downsize and move into a smaller home or a retirement premises.
With a bridging loan they can buy their new property while deciding what to do with their current home.
There is a definite trend for people taking out bridging loans and the numbers increased by 97% between the last quarter of 2013 and the final quarter of 2014.
That figure comes from the Association of Short-Term Lenders (ASTL) who say that while there is still some misunderstanding about what a bridging loan is and what it can be used for, especially by mortgage brokers who may not be so familiar with them, there is a growing understanding and appreciation of how effective they can be as short-term loans.
Indeed, the bridging loan market in the UK is now a competitive sector with new financial products and lenders coming to the market on a regular basis.
Bridging loans makes senses over a short term
The result is that interest rates have been driven down and are at their lowest for several years which makes a bridging finance product a viable option for those who may have considered them to be too expensive at some point previously.
The best way to find a bridging loan is to access it through the intermediary market since the products are generally marketed through brokers.
However, for anyone wishing to take out a bridging loan it is always a worthwhile exercise to ensure that the lender, and indeed the broker, are members of the ASTL since they are obliged to follow a strict code of conduct which ensures a high-level of transparency and service.