Historically it has been possible to raise large short term loans secured on most types of commercial or residential property. Large loans are above £ 1,000,000. This has been achieved by the use of a bridging loans, these are non status short term loans based on the value of the property. The amount of the loan would be based on the ratio of the loan to the value (LTV) of the property as confirmed by a valuation survey. Bridging loans could normally be completed within a matter of days. The funds raised could have been used for any legal purpose and could be taken over a period from one day to 12 months.
With the credit crunch still ongoing is it still possible to borrow large loans using bridging finance? Unfortunately bridging loan lenders are less and less willing to lend more than £ 1,000,000. Even lenders who advertise this facility will not in fact lend this amount unless the LTV are at very low values, probably less than 50%. Even then the exit route will have to be in place. The reason for this is that the value of prime location properties fluctuates wildly. The values in city centers have been a function of foreign buyers and huge yearly bonuses paid in the financial sector. If the worst happens and the property is repossessed it is hard to sell on high value properties quickly. Even the auction route is not really appropriate for properties of this value. Country houses are specifically affected as buyers for the majority of these types of property are in short supply. Even prime locations in central London and other major cities are not moving as they once were, the affect of redundancies in the financial sector and the reduction or cancellations of bonuses are taking their toll.
Fortunately there are a few lenders around who will still lend large loans of £ 1,000,000 plus but to get the loan approved the proposal has to be particularly strong. The borrower will normally have to put in some of their own funds to secure the loan. The valuation report prepared by the Chartered Survey will have to be clear cut with no Special Clauses or caveats that may affect the value stated. Finally the exit route will have to be realistic and part way to be agreed with written confirmation from a long term lender, that they would be willing to refinance the property at the end of the bridging loan term. If the exit is by sale of the property then the property will have to be in a location where sales are strong for that type of property or a sale agreed with the end purchaser.
So finally it is still possible to raise large bridging loans on property in the current credit crunch with the aid of a good bridging loan broker. But how long this will last is dependent on the health of the financial system which depends on your outlook in that either either we are all doomed or that values will shoot up in 2010.