Customers - Support - West One Specialist Lending

The Basics

What is a bridging loan?

A bridging loan is a short-term interest-only loan available to those that need immediate access to capital. Usually used for a property purchase, it is a loan to ‘bridge’ the gap while other finance (such as a mortgage) is secured by the borrower. Bridging finance is secured, meaning the borrower uses property (or land) as security to the lending institution.

Who can apply?

Any individual or limited company can apply for a bridging loan.

Who might use a bridging loan?

Bridging loans are mainly used by clients who need quick, short-term capital to fund a property purchase. They include those who:

need to complete quickly. This might include property developers, who often have the opportunity to secure a great deal if they can complete quickly.
buy through a property auction. Bridging finance is popular with those buying property at an auction. Here, completion has to take place within 28 days, which means traditional financing is not usually an option.
are in a broken property chain. A bridging loan enables a seller of one property to secure their new property before the sale of their existing property goes through.
want to buy an uninhabitable property. Traditional lenders will often not lend on a property if there is no kitchen, bathroom, central heating or running water (especially buy-to-let mortgages). A bridging lender will base its lending on the property’s value in its current condition, however. This enables the buyer to access the property and work on it to make it habitable.
are renovating or developing a current property. A property investor may want to renovate a property within a few months and either sell it on or refinance. A bridging loan can often be the perfect vehicle for this short-term capital requirement.
have to get planning permission. In order to obtain planning permission and secure development funding, the developer may need immediate access to capital.
need a lease extension. When a property has a short lease, a borrower will likely be refused a traditional mortgage. A bridging loan can be used to extend the lease, which then makes the property mortgageable through conventional lenders.

What is the difference between a first and second charge loan?

A ‘first charge’ is the primary mortgage or loan secured against a property. This takes precedence over all other finance secured against it. However, if there is sufficient equity in the property, a ‘second charge’ loan could be secured against it.

What is Mezzanine Finance?

West One only offers Senior Development Finance (1st charge) up to 65% LTDGV and 85% LTC, however we will consider applications where Mezzanine Finance is being used.

When a developer lacks sufficient cash to cover project costs which aren’t covered by the Senior Finance, they could seek Mezzanine Finance which is a loan secured via 2nd charge.

Mezzanine Finance can take a client’s contribution from 15% of project costs down to 10% of project costs as they typically fund up to 75% LTGDV and 90% LTC.

Who do I need to speak to in the first instance?

If you are a broker with an existing relationship with a member of the Development Finance team please use their contact details otherwise, you can contact the team using the below details.

Phone - 0333 123 4556
Email – Developmentfinance@westoneloans.co.uk

Do you need to be an experienced developer in order to apply for a development loan?

Yes, we require applicants for development loans to have a minimum of two developments completed similar to the proposed scheme.

Terms

How much can be borrowed?

We lend from £75k upwards. Whilst our typical loans are between £250k - £5m, we have experience with loans in excess of this.

How long can a bridging loan be taken out for?

As a short-term finance solution, a regulated bridging loan is generally taken out for up to one year. However, it is not uncommon for some unregulated bridging loans to last for up to two years.

What is Funding in Arrears and how does it work?

All West One Development Facilities are funded in Arrears.

Following the facility set up, the initial works on site must be funded by the developer.

In the following month, the West One appointed Independent Monitoring Surveyor (IMS) will visit the site to assess the works which has been completed along with all the relevant paperwork provided by the developer/contractor.

The IMS will then provide a report to West One, certifying the amount which they believe should be release against the works carried out by the developer/contractor to date. This is typically done monthly until the scheme has been fully developed.

With our facilities being Rolled up Interest, the developer does not have to worry about paying interest monthly and can concentrate their cashflow on progressing the development.

Interest is also only applied to the parts of the loan which have been drawn to date, meaning that if the developer completes the project only using a portion of the loan, they only get charged interest on that portion.

Can I get development finance even if I don’t have planning permission?

No – we will only complete a loan on the condition that full planning has been granted.

Fees, Repayments & Commission

Can the loan be repaid early?

Yes. Once the borrower secures longer term funding, or another exit – such as sale of property - the bridging loan can be paid early without penalty in most cases.

Are there any upfront fees?

No. Although valuation fees will apply and other fees will be deducted from the loan.

What interest rate will the client pay?

This depends on the individual circumstances of the borrower. However, the interest rate ranges from between 0.75% to 1.5% for each month of the loan, and the borrowing is arranged on an interest-only basis.

Criteria

Do you only lend on specific types of properties?

No. We lend on residential, semi-commercial and commercial properties and land. The construction, type or use for the property doesn’t matter either.

Are there any employment criteria for the borrower?

No.

Is my client subjected to a credit check?

A credit check is not carried out by West One unless we are given permission to do so by your client.

What is an exit route?

Since bridging loans are for the short-term, each client must have a plan in place to pay off the loan. This is known as an ‘exit route’. A viable exit route is a must on all bridging loan applications.

Application Process

When will my client find out if their application has been successful?

Our experience means that in most cases we will be able to confirm almost immediately whether your client’s application is likely to be successful.

What is the process once the application has been sent?

Once we receive the application form, we will instruct solicitors and the valuation simultaneously. Once the valuation report and legal due diligence has been completed, we will then issue a Facility Letter (or Mortgage Offer) alongside a suite of legal documents for the borrower to sign. Funds will then be sent to the solicitor for completion.

How long will a bridging loan application take to complete?

From the initial enquiry through to completion, our average turnaround time is just two weeks.

How long does it take for a client to receive funds?

Each case is reviewed individually. However, if all the paperwork is complete then a client could receive funds in as little as 48 hours.

What information do I need to provide about my project?

Details of the scheme
Development appraisal breakdown (i.e. build costs, contingency, professional fees, CIL/S106 & any other development costs)
CV detailing past experience
Full security address
Purchase Price/Market Value
Schedule of accommodation / GIA
Planning Status
Plans/drawings if available

Bridging

What are the contact details for the Servicing team?

servicing@westoneloans.co.uk or 0208 736 2241

How do I make a capital reduction?

Please contact us at servicing@westoneloans.co.uk or 0208 736 2241 to discuss.

Do you charge daily or monthly interest?

Monthly interest

How long does it take for my charge to be removed form Land Registry after it has redeemed?

Your solicitor needs to send the relevant discharge form to our solicitors for signature, once done it will be returned to your solicitor. It's your solicitor's duty to send the completed form to the relevant registry to discharge the Security. Typically this is amended within 4- 6 weeks.

Can I extend my facility?

This is a possibility but dependent on a number of factors. Please contact servicing@westoneloans.co.uk or call 0208 736 2241 to discuss. Please note all extension requests are subject to underwriting and valuation.

What happens if there is a change to the Company’s Directors?

The directors named on your account must match the directors named on Companies House at all times throughout the loan. If changes to the directors of the company are planned, the new director must call us so we can undertake the appropriate checks. We'll also need certified proof of ID and proof of address of the proposed director(s).

Please note, if you’re removed as a director, your personal guarantee still remains valid.

How do I request a redemption statement?

Please email servicing@westoneloans.co.uk or call 0208 736 2241 for this to be issued. Please also provide details of your solicitor. Please note that interest is calculated monthly and funds must be sent via solicitors.

Can I redeem directly?

We require redemption funds to be sent via your solicitor to our solicitor and are unable to accept funds directly.

What do I need to provide to have a security released from my loan?

As a minimum, your solicitors must provide a title plan, completion statement and confirmation of the amount being offered to consider this request.

Can I borrow more money?

Please contact your original broker for options and advice

Long Term Lending

Can I have a Redemption Statement? (The amount I need to fully repay the mortgage)

Please call the Servicing Team on 0208 7362241 or email the servicing@westoneloans.co.uk.

Can I borrow more money or take out a new loan?

Please speak to a Broker or independent Financial Adviser, we do not do direct lending.

Can I have a statement of account?

Please call the Servicing Team on 0208 7362241 or email the servicing@westoneloans.co.uk.

Can I change my payment date?

You can change the date which you make payments to us. In order to get this processed please call the Servicing Team on 0208 7362241 or email the servicing@westoneloans.co.uk.

What is the difference between a Capital Repayment Mortgage and an Interest Only Mortgage?

With a repayment mortgage, every month you pay back both the interest on your mortgage AND some of the loan itself. ... With an interest-only mortgage, you only pay back the interest on your loan. This means your monthly payments are much lower, but you will still need to pay off the loan at the end of the mortgage term.

Am I eligible for a product switch?

If you are an existing 1st charge Buy-to-Let customer you may be eligible for alternative products, please contact us on 0333 123 4556 or email servicing@westoneloans.co.uk for more information.

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