Brokers should check viability of client exit strategies

The guide contains three key recommendations when it comes to arranging bridging loans: 

1. Each client must have a solid exit strategy in place to pay off the bridging loan. A viable exit route is as important as the client’s status, property valuation and loan-to-value. Exit strategies can include refinancing, the sale of the property, equity release, inheritance, investments or pension. The more exit strategies a borrower has in place the better. 

2. Brokers must make sure their clients know the repayment date and ensure there is nothing on the horizon that could delay that payment. The broker must ensure the borrower understands non-payment could result in the loss of the property. 

3. Brokers should ensure all the paperwork and documentation the lender requires is sent as one package, rather than sent at different stages. 

The guide also explains the circumstances when a bridging loan may be suitable, what type of finance is regulated and unregulated, plus the benefits and risks associated with this product. 

David Thomas, Chair of the Society of Mortgage Professionals, said: “There are many benefits to bridging loans such as speedy application, quick transfer of funds and broader lending criteria but it is vital brokers understand the risks as well as the benefits of this product. 

“While it may be difficult to gauge the property market 12 months from the start of a bridge, the borrower needs to be certain that they will be able to realise their desired value at the term end in order to ensure that their property sells should this be the exit strategy to repay the bridging loan.”

View the guide

ENDS

Contacts

Helen Moore, Communications and Engagement Manager

Helen.Moore@cii.co.uk

T:  +44(0)20 7397 1121

M: +44(0)7464 521 213

Reace Novello, Public Relations Executive, Personal Finance Society

T:  +44(0)20 7397 1113

M: +44(0)78 6732 4170

E:  Reace.Novello@cii.co.uk

Notes to editors

The Society of Mortgage Professionals (SMP) is a professional body dedicated to those working in the mortgage market.

The core objective of the Society, aligned to the Royal Charter mission of its parent, the Chartered Insurance Institute, is to engender consumer confidence and trust in the profession. It does this through a focus on raising professional standards and by supporting its members with a code of professional ethics, good practice guidance, thought leadership and a programme of topical and dedicated continuing professional development.

For more information visit the Society of Mortgage Professionals.