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Bridging Loans

How Can Bridging Finance Help During Divorce Proceedings?

Far from a rarity, divorce is becoming more commonplace than ever before. In fact, research suggests that a full 33% of all UK marriages end in divorce.  Separation is always emotionally fraught and logistically complex, but can also be surprisingly expensive.

This is particularly true in instances where one partner owes the other a significant sum of money, or where there are marital assets that cannot be divided equally. For example, the house the couple lived in together, if one of the partners wishes to retain its ownership after the other leaves.

The financial complications associated with divorce often take separating partners by surprise. Little to no specialist support is available on the High Street, but can be sourced from elsewhere from established independent lenders.

Bridging finance in particular can be useful when dividing assets and consolidating expenses, due to its flexibility and prompt accessibility.

Financial Support During a Divorce

Every separation is unique, and the financial complications of divorce differ significantly from one couple to the next. Some partners split amicably and come to agreements on asset division with no outside intervention. Elsewhere, others face the unsettling process of dividing a long list of marital assets, which in the case of tangible property and possessions often cannot be split down to the middle.

The definition of ‘marital’ assets is also somewhat open to interpretation, in terms of the proportion of any given asset that belongs to each of the partners. Legal support and even court intervention is often required, in order to determine who owns what, and how joint assets should be split.

At which point, it may become necessary for one of the partners to pay the other a large lump sum of money. This could be to ‘buy them out’ of the home they once shared, to take full ownership of a shared car, and so on.

Conventional loans and mortgages can be too complex and time-consuming to arrange for such purposes, whereas a specialist bridging loan can often be accessed within a few working days.

The Role of Divorce Loans

A divorce loan is a special type of bridging finance, issued for these exact purposes. As the name suggests, the facility is designed to ‘bridge’ urgent yet temporary financial gaps, while the borrower gets their financial situation back on track.

With divorce, one thing both partners are always in agreement on is the importance of a prompt resolution. Nobody wants separation proceedings to drag on for months, but this is often the case where financial complications prove burdensome.

Bridging finance can be used for any legal purpose, and provides borrowers with the opportunity to quickly liquidate assets for division. It can also be a useful facility for clearing debts with a former spouse, or for buying them out of jointly-owned assets.

For example, a bridging loan could be taken out against a co-owned property, at an LTV of 50%. Accessing 50% of the equity tied up in the property, the partner who will continue living there can pay off their ex-spouse, and take full ownership of their home.

This bridging loan will then accrue interest at a rate as low as 0.5% per month, giving the borrower plenty of time to consider the options available. They could sell the home to pay off the loan a few months later, or transition the bridging loan to a longer-term mortgage for flexible repayment.

The overriding point is that with bridging finance, everything can be taken care of as quickly as possible. Rather than waiting weeks (or even months) for a major bank to reach a decision on a loan or mortgage application, the funds needed to bring the matter to a swift conclusion can be accessed in a matter of days.

How Does Bridging Finance for Divorce Work?

Bridging finance for divorce works in the same way as conventional bridging finance. A few of the key features of bridging loans for divorce (and other purposes) are as follows:

  • Loans available from £20,000 with no upper limit
  • Repaid in a single lump sum after 6 to 18 months
  • Can be used for any legal purpose whatsoever
  • Competitive loans available for poor credit applicants
  • No proof of income or employment status required
  • Monthly interest as low as 0.5%
  • Loans can be arranged and accessed within a few working days
  • Available with LTVs as high as 85%
  • Can be secured against any type of property (and other assets)
  • No arrangement fees or exit fees

Essentially, bridging finance works in a similar way to a mortgage, but on a much shorter-term basis. The loan is arranged in a matter of days, and the facility is repaid in full within months.

During time-critical situations where financial matters need to be resolved as quickly as possible, bridging finance offers a practical and affordable solution.

For more information on any of the above or to discuss divorce finance in more detail, contact a member of the team at UK Property Finance today.

Frequently Asked Questions

What is a bridging loan?

Bridging loans are short-term secured loans, which can be used for any legal purpose. They are secured against assets of value in the same way as a mortgage, but are much quicker to arrange and are designed to be repaid within 6 to 18 months. As the name suggests, bridging finance is designed to “bridge” temporary financial gaps.

How long does it take to get the funds?

With all the required documentation and supplementary evidence in place, a bridging loan can be arranged in a matter of days. Completion times vary from 1 to 14 working days, depending on the borrower’s requirements and the strength of their application. Broker support can significantly accelerate the speed and simplicity of bridging finance applications.

Can I still get a bridging loan with bad credit?

Yes – bridging loans are issued primarily on the basis of security, along with the applicant’s proposed exit strategy. If you have assets of value (like your home) to cover the costs of the loan and a plan to repay the balance in full by an agreed date, you can get a bridging loan – irrespective of your credit status.

Can self-employed workers qualify for bridging finance?

Yes – employment status and proof of income are not ‘binary’ eligibility criteria with bridging finance. If you have viable assets of sufficient value to cover the costs of the loan and can comfortably afford to repay the balance in full by the agreed state, your employment status is not important. However, it is important to enlist broker support at an early stage, in order to ensure you target the right lenders with your applications.

What type of security is required?

Most bridging loans are secured against properties owned by the applicant.  These can be residential properties, commercial properties and all types of mixed-use properties, along with land (with or without planning permission). Some lenders are also willing to accept other assets of value or security, including business equipment, cars and commercial vehicles, jewellery, watches and even company shares.

For more information on any of the above or to discuss any aspect of divorce finance in more detail, contact a member of the team at UK Property Finance today.

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Other Finance News

Why it Pays to Make Your Rental Properties More Energy Efficient

Most current indications point to a gradual-but-accelerating return to town and city living. The latest data from Rightmove confirms a major spike in demand for rental properties in and around London, as workers once again find themselves beckoned back to the office.

All of which is playing directly into the pockets of buy-to-let landlords, who across the UK are reaping the benefits of record-high monthly rents.  Unfortunately, many (if not most) of these BTL investors are also finding their futures blighted by the prospect of new minimum EPC rating requirements on the horizon.

Recent estimates suggest that at least 60% of all current housing stock in the UK has an EPC rating of D or lower. This would suggest that the vast majority of properties will need to be upgraded significantly, in order for them to meet the new minimum C rating within the next few years.

The extent of the repairs required will vary significantly from one property to the next. Even so, it is estimated that the average landlord will face costs of between £6,000 and £10,000 – some significantly more.

Understandably, the tendency among many cash-strapped landlords is, for the time being at least, to bury their heads in the sand. But while forking out significant sums of money for energy-efficient upgrades is far from fun, it’s something that really needs to be done sooner rather than later.

Here’s why:

Tenants Prefer Energy Efficient Properties

With household energy prices at record highs, tenants are increasingly setting their sights on energy-efficient properties. Further hikes are on the cards for the coming months, which will make it increasingly difficult to let out inefficient homes for decent prices.

The more energy-efficient a rental property, the easier it is to let out and get the best possible return on your investment.

You Have No Choice But to Make the Necessary Improvements

The costs of making the renovations required to meet the government’s new standards are only likely to increase over time. Those who wait until the last minute will only face the prospect of elevated costs and a mad dash to get over the finish line in time.

Acting early could therefore save landlords time, money and stress – all in significant quantities.

You Could Face Heavy Penalties if You Don’t

For those who fail to meet the deadline, significant penalties will almost certainly apply. 

“The proposed Minimum Energy Standards for rented properties will shift from an E rating to a C rating under the new rules, and making changes isn’t optional. The new regulations will be introduced for new tenancies first from 2025, followed by all tenancies from 2028,” commented Sundeep Patel, Director of Sales at Together.

“If your property is found to fall short of the required rating, you could face a fine of up to £30,000. Plus, you’ll have an unlettable property on your hands, which is not only a waste of essential residential resource, but also means you’ll incur a loss of rental income.”

If you would like to learn more about the potential benefits of bridging finance for energy-efficient home improvements, contact a member of the team at UK Property Finance today.

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Other Finance News

People Are Choosing Longer Term Rentals, Even as 86% of Rental Households Face Financial Strain

Getting a foot on the UK’s property ladder has become borderline impossible for an entire generation of renters. Skyrocketing house prices combined with an unprecedented cost-of-living crisis have forced many to abandon their dreams of homeownership entirely.

Consequently, a study conducted by Ocasa indicates that more UK residents than ever before are viewing long-term private rentals as a viable alternative to home ownership. Affordability and flexibility were found to be the two main points of appeal, among those seeking long-term rents over property purchases.

But even with the number of rental properties in the UK having increased by 1.1 million over the past 10 years, average rent costs are hovering at record highs.  In fact, a full 86% of UK tenants said that rent cost increases have placed greater strain on their household expenses over the past few years.

This could be one of many reasons why tenants are actively seeking longer-term agreements with their landlords. Where possible, locking in an agreed maximum rent in return for a longer-term tenancy agreement is becoming the preferable choice for many.

The alternative option is to risk regular and rapid monthly rent increases, each time a shorter tenancy agreement expires and needs to be renewed.

An Escalating Cost-of-Living Crisis

Where households are already struggling to make ends meet, utility price increases are the single biggest cause for concern. Monthly rent cost increases and fuel prices are also contributing to widespread financial instability, along with council tax bills and food prices.

Polled by Rentd, 46% of households said they were worried about further living-cost increases forecast for the remainder of the year, while almost 60% said they would likely have to make additional cutbacks over the coming months.

Speaking on behalf of Rentd, CEO and founder Ahmed Gamal highlighted how private tenants are being hit disproportionately hard by living-cost increases.

“The cost-of-living crisis is particularly concerning for the nation’s tenants, many of whom would have already been struggling with the cost of renting and will now find they are being financially stretched to their limits,” said Gamal.

“During the pandemic, we saw rental values drop across a great deal of the market, but with normality returning this year, they are once again starting to climb. This means that many tenants may now be finding that the cost of renting in their given area is quickly becoming unaffordable,”

“When committing to a rental property, it’s important to consider that much like a variable rate mortgage payment, the cost of your rent is subject to change. So it’s vital to leave yourself some room within your monthly budget to account for this increase, otherwise, you may find yourself looking for a more affordable property or location.”

Discouraged by High Upfront Costs

Among those who would like to own their own homes but cannot afford to do so, high upfront costs of purchasing a property are the biggest discouraging factor. Average UK house prices are now heading towards £300,000, meaning that the average deposit (at 15%) a buyer would need to come up with would be around £45,000.

Coupled with the rest of the initial costs associated with buying a home, total on-hand savings needed to get the transaction underway would exceed £50,000.

The overwhelming majority of average earners in the UK simply do not have the capacity to come up with anything near this amount. All of which can be particularly disappointing for those whose monthly rent bills are significantly higher than the average monthly mortgage payment on a comparable property.

Despite being able to comfortably afford a mortgage in terms of repayments, millions are nonetheless unable to meet the basic requirements to qualify.

Even so, Jack Godby, Head of Sales and Marketing at Ocasa, was keen to point out how renting long-term need not always be seen as a last resort, worst-case scenario option.

“In the UK, popular opinion has long said that owning a home is better than renting; renting is something you do while you wait until you can afford to buy. But this isn’t the case in other countries, and it’s become less and less so here,” he said.

“People are now choosing to rent for the long-term, rejecting buying altogether because of the many downsides that come with ownership, from the growing expense to the risk and inflexibility,”

“In reaction to this growing demand, rental providers are upping their game, providing high-quality homes with tenancy agreements that offer greater security and more freedom to make the property their own,”

“This is particularly true of the build to rent sector which has grown phenomenally in just a few short years and looks to be one of the driving forces of change when it comes to how we choose to live.”

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Other Finance News

Wedding Loans: An Introductory Guide

Planning a memorable wedding is not for the faint-hearted. Both in terms of the logistics involved and the costs, it can be a surprisingly time-consuming and complex endeavour.

According to the latest National Wedding Survey (conducted by Hitched.co.uk), the average cost of a wedding in 2021 was £17,300. This marks a dramatic increase from the £9,100 average in 2020, and is set to continue escalating as inflation continues to skyrocket.

In general, experts recommend setting aside around £20,000 as a base figure, once all expenses have been factored in.

Unfortunately, this simply isn’t the kind of money most people have lying around. Some couples save for several years to pay for their dream weddings, while others turn to family members for support. But there is a practical and flexible alternative for those who can neither save nor borrow the money they need from their loved ones.

Designed specifically for making special days as special as they can be, a wedding loan could be just the thing to make the whole thing more affordable.

What Are Wedding Loans?

Wedding loans are typically issued in the form of unsecured personal loans, but there are also secured borrowing options available. Terms, conditions and borrowing costs vary in accordance with how much you borrow, the length of the repayment period and your credit status.

Depending on the lender you choose, you could be looking at total interest payable of anything from 5% to more than 35%. The balance of the loan can be repaid over monthly instalments spanning one to 10 years, and there is no upfront payment (deposit) required.

Some banks issue standard personal loans which can be used to fund weddings, while others provide specialist wedding loans issued exclusively for this purpose. Either way, the money can be used to cover the costs of venue hire, catering, transport, attire, décor and even the honeymoon of a lifetime.

How Much Money Can I Borrow with a Wedding Loan?

The amount you can borrow will be determined by your financial status and creditworthiness at the time of your application. In the case of an unsecured personal loan, the following factors will be taken into account by your lender:

  • Your credit score
  • Whether you apply individually or as a couple
  • Your chosen lender
  • Your income and debt
  • Your general financial status

With personal loans for weddings, it is possible to borrow anything from £1,000 to around £15,000 – depending on your financial circumstances at the time. For figures in excess of this, a secured loan could be a better option.

With a secured loan, there are technically no limitations to how much you can borrow. The loan is secured against assets of value (usually the home of the borrower) in the same way as a mortgage.

Secured loans are typically issued in sums of £10,000 or more, and can attach lower rates of interest than comparable unsecured loans. However, it is important to acknowledge the fact that your home may be at risk of repossession if you do not keep up with your monthly repayments.

When Should You Get a Wedding Loan?

Applying for a wedding loan could be the best course of action if the following apply:

  • You need the money as quickly as possible, either having decided to get married in the near future, or with the date of your wedding approaching and various costs still outstanding.
  • Your credit score is up to scratch, as this is the main factor that will determine your eligibility for an unsecured personal loan.
  • You can comfortably afford the monthly repayments, having considered both your immediate and your long-term financial situation.

Before applying, consult with an independent broker to discuss your eligibility for wedding finance and the various unsecured and secured funding options available.

How to Get a Loan for a Wedding

If you need to borrow money to pay for a wedding, there are a few steps to take before the money hits your account.

Pros and Cons of Wedding Loans

Broker support is essential to ensure you get a good deal on a wedding loan.  Your broker will scour the market in its entirety to find you an appropriate product and will negotiate on your behalf to ensure you get the best possible deal.

In addition, your broker will ensure you are familiar with the basic pros and cons of wedding loans, which are as follows:

Pros

  • Wedding loans can be secured or unsecured. This opens the door to a variety of different types of loans for all applicants, including those with poor credit or no formal proof of income.
  • Interest rates are lower than credit cards.  Interest rates on credit cards can be anything from 0% to more than 25%. With a typical short-term wedding loan, you could be looking at an interest rate of around 5%.
  • Fast access funding available. With specialist products like bridging loans, the money you need could be in your account and ready to use within a few working days.

Cons

  • Additional debt.  By taking out a wedding loan, you will have one more formal debt to contend with when the dust settles.
  • Temptation to overspend. There is also the undeniable temptation to borrow more than you need and more than you can afford to make your wedding as lavish as possible.
  • Restricted lending. Unsecured wedding loans are issued exclusively to borrowers with an excellent credit score and extensive proof of their financial position.

Alternatives to Wedding Loans

Where specialist wedding loans are unavailable or simply not your preferred choice, the following can also be used to cover the costs of a wedding:

Credit Cards

Some credit cards provide new customers with an introductory 0% interest period, which can be great for spreading the costs of larger purchases or investments over a year or so.

Bridging finance

Fast-access bridging loans are ideal where short-term repayment is possible, charged at around 0.5% more a month and with minimal associated borrowing costs.

Home Equity Loan

There is also the option of borrowing against the equity you have tied up in your home in the form of a remortgage, a mortgage extension or a specialist home equity loan.

Before deciding which of the options is best for you, consult with an independent broker for their input and advice. Your broker will also provide the representation you need to ensure you get the best possible deal, whichever product you decide to apply for.

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Mortgages Other Finance News

Increased Mortgage Interest Rates Combined with the Cost of Living Crisis Forces Buyers and Homeowners to Dip into Savings

It’s no secret that times are hard for millions of UK residents, with the cost of living escalating at a speed not seen since the big recession back in 2008 and with the cost of mortgages constantly on the rise, affordability for new buyers is becoming increasingly out of reach with many not having enough savings for a deposit and others struggling to meet their current monthly mortgage obligations.

Cost of Living Crisis

Adding to the misery is the fact that inflation rates are at the highest seen for thirty years pushing monthly outgoings through the roof for the vast majority of the population. Wages are certainly not keeping up with the rapid price increases resulting in many accessing savings just to meet their monthly commitments. With inflation at a thirty year high of 9% and expected to reach 10% by next year, households will need to tighten their belts even further.

And it’s not just inflation that is causing chaos for many, the enormous gas and electricity price hike is a worry for almost every household in the country. This is due to the impending increase in the energy price cap coming in October and the embargo on oil and gas from Russia. Diesel and petrol prices are at the highest ever seen which is having a detrimental effect on drivers and in turn causing further increases in prices, due to the added costs of manufacturing and logistics.

Bank of England Increases the Base Rate for Fourth Time in a Row

Despite increased mortgage interest rates, the property market remains surprisingly buoyant, but experts are predicting a marked slow down over the next year, when house prices are expected to stabilise and with any luck the economy will start to recover, although there is still a lot of uncertainty surrounding this expectation as inflation continues on an upward trajectory.

The main reason for the interest rate hike is that the Bank of England has raised the base rate four consecutive times since December 2021, increasing base rates from 0.1% to 1%. Their reasoning for doing this is to try and tackle the huge increase in inflation. The concept behind this is to discourage people from spending and encourage saving instead.

A Third of Income Needed for Mortgage Repayments

Average monthly mortgage repayments are now approximately a third of monthly income. Annual income, on average, in the UK is currently £31,447. So for example, a home bought for the average price of £276,019, on a 25 year loan period, with a 75% LTV (£69,000 deposit) and a fixed rate at the current average mortgage rate of 1.84%, will equate to monthly repayments of £859.41.

Current figures show homeowners using 32.8% of their monthly wage to meet their repayment obligation which is up 5% since before the Covid pandemic and close to levels seen during the credit crunch of 2008 when the UK was plunged into a crippling recession.

CEO of Octane Capital, Jonathan Samuels, commented: “The cost of living crisis is a current cause of great concern and many homeowners are not only combating the inflated cost of day to day living, but also the monthly cost of their mortgage following a string of interest rate increases.

“At the same time, wage growth has simply failed to keep pace with these rising costs and so the proportion of our income required to cover our monthly mortgage commitments is now substantially higher than it has been for many years.

“Unfortunately, this cost only looks set to increase as we expect to see interest rates increase further throughout the year. The best advice for those currently struggling is to consult a mortgage professional and see if they can swap to a product offering a better rate. For those currently looking to buy, it’s vital to factor in any potential increase and not to borrow beyond your means based on current rates.

“While the current cost of borrowing may still remain fairly favourable, it’s vital you consider what any further increases may mean for your financial stability, as those borrowing right up to their limits initially are sure to struggle further down the line.”

Savers Forced to Access Funds to Survive

It’s not surprising that a huge number of UK residents have been forced to use savings to get through the month particularly in the last year. That is true for those lucky enough to have savings to fall back on, but the financial strain on those who have little to no savings is on the up, with many getting deeper into debt and the forecast for the next twelve months does not look bright.

According to a to report from Yorkshire Building Society, aptly named “Inflation Nation”, 17% of UK households had no savings at all. The report, which surveyed 4000 households, revealed that 39% had withdrawn funds from their savings account with a further 17% taking out over £1,000 to meet their financial obligations.

The report went on to reveal that the vast majority of people were either unable to save anything at all or were saving significantly less than they would typically be able to save.

The report went on to show that, of those surveyed, around 40% predicted increases of between £100 and £500 in monthly bills over the next year, making it even harder if not totally impossible to increase savings.

Government Help for Millions

On the 26of May, Rishi Sunak announced a £15 billion package to help UK households with the escalating energy prices. Poorer households will be eligible for a one off £650 payment to help towards gas and electricity bills with the rest of UK households to receive a £400 discount.

He stated: “We know that other countries in Europe have taken measures to help households with their energy bills, so this is obviously very helpful from an economic perspective, unlike the previous plan that was made available in March.”

“The government’s measures are really quite important because we know that there are a lot of people in this country who don’t have any form of savings.

“If a large proportion of the population starts to reduce their expenditure in other parts of the economy, then I think we could be in a very, very difficult economic situation.”

Although this help is welcome, for many households it will not be nearly enough to keep them out of an impending financial hole over the next twelve months with the cost of living crisis not expected to end any time soon.

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Development Finance

What Investors Need to Know About Development Finance in 2022

Development Finance is an ideal solution for developers and property investors looking to fund the construction or refurbishment of their properties using short term funding solutions. When looking at funding for your development project it is imperative that you familiarise yourself with all the options available so that you can make an informed decision.

What is Development Finance?

Development Finance is a short-term loan for property development that is exclusively used for the construction or refurbishment of a property or properties. It provides funds for investors and developers to manage project purchases and build costs.

Whether you are considering a residential, commercial, or mixed-use project- development finance could be a funding option available to you, including ground-up new builds, knock-down and rebuild projects, conversions, and refurbishments.

Development loans are typically arranged very quickly as opposed to other long term funding products, such as mortgages, which can take considerably longer to be approved. 

Most lenders will offer a loan period of 6 to 24 months however some, but not all, may extend this should you need to.

Although similar to bridging finance, development finance can provide both an upfront loan towards the site acquisition as well as further funding released at different stages throughout the project.

The Advantages & Disadvantages of Development Finance

Development finance offers unique benefits to property developers that other loan products can’t, however, it is vital that you take into consideration both the advantages and disadvantages before starting your development project.

Advantages

  • Quick to Arrange

Development finance can be made available quicker than applying for a traditional mortgage. Funds can be arranged in a short space of time, typically between 1 to 4 weeks which allows the development project to get underway while alternative funding is arranged.

  • Short-Term Loan

Development finance loans are available for a short term, usually between 6 and 24 months. The transient nature of this type of finance reduces the risk of being burdened by debt for an extended period or facing high early repayment penalties should you wish to repay early.

  • Roll-up Interest 

Development Finance offers developers the opportunity to repay all the capital and interest in a single payment at the end of the term. The interest ‘rolls up’, eliminating the need for regular monthly payments.

  • Competitive Interest Rates

If you are an experienced developer, you may be able to secure a development loan at a lower interest rate than inexperienced developers. Loans can be secured at a lower interest rate for larger projects and can be further lowered if you borrow a lower proportion of the gross development value (GDV).

Considering all these factors leaves us with a realistic range of 16% per annum as the upper limit for the interest rate on a development finance project that can go as low as 5% per annum for experienced developers borrowing a large amount at a low proportion of the GDV. 

  • Take On Large Projects 

Development finance paves the way for developers to take on ambitious projects with higher complexity and enables them to work on multiple development projects simultaneously. Traditional financing options can restrict developers from experimenting with more complex projects, whereas development finance offers the flexibility to work on projects of varying size and complexity.

  • Available For a Wide Range of Projects

Development finance is ideal for new build, residential, commercial, and semi-commercial property development projects. It is especially beneficial for properties that require remedial works prior to being funded using traditional forms of financing. Developers can borrow loans even for derelict properties that would be impossible to get a mortgage for. The short-term financing option allows developers to refurbish any property and sell at a profit.

  • Limited Capital Outlay

Development finance doesn’t require any upfront payment other than your deposit. Instead your cash on hand can be used for other expenses or simply to improve your cash flow position.

Disadvantages

  • Eligibility Criteria

Most lenders have strict eligibility criteria when approving development finance, particularly when the borrower is a first time property developer. Developers with extensive portfolios will find it significantly easier to be approved for this type of finance.

  • Planning Permissions

Many lenders will require you to have all planning permissions needed for the development to be in place before considering any application for development finance. Issues with planning may cause considerable additional costs and problems down the line and therefore the lender will want to see evidence that planning has been approved prior to approval.

  • Paper Work

As the application process for development finance can be complex, it is imperative that you have all your paperwork in order before you apply. Lenders will expect to see an extensive plan detailing all aspects of the development including planning permission, designs, drawings and most importantly, costings.

  • Additional Fees

It is important to take into account any additional fees when costing your development project. These include arrangement fees, valuation fees and legal fees which can usually be added to the loan amount and therefore will not need to be paid upfront. There is also likely to be an exit fee at the end of the loan period when full repayment is made.

  • Development Finance for Limited Companies

For limited companies applying for development finance, most lenders will require some form of personal guarantee from the company’s directors to minimise the risk to themselves. It is worth noting that individuals applying will be personally liable for the entirety of the loan.

Who Uses Development Finance?

As the name suggests, development finance is primarily used by property developers and investors, for ground-up and extensive renovation projects. Funding can be used for land purchases as well as for the entire building costs. It is not unusual for a lender to fund, for example, 50% of the land purchase and 70% for the building costs, meaning that the developer will have less upfront costs which in turn positively effects their cash flow which can be utilised in other areas.

Is Development Finance Right for Me?

Once you have conducted your due diligence, it is time to make a final decision. So, how do you determine whether development finance suits you and your business needs? Answering a few simple questions can help you gain a better understanding:

Evaluating your business needs is the first step to determining if Development finance is ideal for you:

  • Analyse whether your business needs a short-term cash inflow or long-term financial aid.
  • Assess your current financial situation to determine your ability to repay the loan on time without disturbing your finances.
  •  Lastly, gauge if you can provide the necessary paperwork to qualify for and access the development loan.

If you can answer these questions comfortably, development finance might be what you need to fund your project. An experienced development finance broker can help developers access the most comprehensive list of development finance lenders at the lowest market rates.

Summary

Individuals, builders and businesses looking for quick, short-term funding can benefit from development finance to fund their development projects. It provides access to the funds developers need to develop or renovate residential, commercial, or mixed-use properties.

Working with an experienced Development Finance broker, such as UK Property Finance Ltd, ensures that the funds you require will be delivered on time and professionally. Talk to our team today for flexible, fast property development loan financing.

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Other Finance News

Energy Efficiency Upgrade Costs a Major Concern for British Households

Research suggests that most UK households are concerned about climate change, and believe that steps need to be taken to safeguard the environment for future generations. A recent study conducted by the Office for National Statistics found that three in four (76%) Brits believe that climate change is a pressing issue that should be prioritised.

However, a separate study conducted by Cornerstone Tax found that a sizeable proportion of homeowners are being discouraged from boosting the energy efficiency of their properties due to the high costs involved. Around 45% of homeowners have investigated the prospect of making their homes more energy efficient but deemed any changes too expensive to go ahead with, without discounts or contributions from the government.

In addition, 22% said that they had taken steps to make their homes more energy-efficient, but were unable to go ahead with their planned upgrades due to planning restrictions.

A Major Source of CO2

With around one-fifth of all CO2 emissions in the UK coming from residential properties, the importance of making collective improvements to household energy efficiency is clear. Consequently, the government recently outlined new legislation that would make it a legal requirement for all homes in the UK to have an EPC rating of C or above by 2035.

Energy efficiency is a priority shared by around 36% of households across the country, according to the report from Cornerstone Tax. But given the potentially high costs of conducting the necessary upgrades and improvements, around a quarter (23%) of those who would like to improve energy efficiency at home have taken no steps to do so.

“It’s clear to me that the government will need to go further in incentivising these types of developments if they wish to see more people carrying them out,” said James Morley, business development director at Cornerstone Tax.

Even so, Mr Morley was keen to point out the potential savings that can be made by conducting energy-efficient improvements to their homes. Examples of which include loft insulation, solid wall insulation, ground source heat pumps and double-glazing, which according to Morley can translate to savings of up to £890 per year in reduced energy costs.

Affordable Funding

Commenting on the findings, group chairman of Cornerstone Tax, David Hannah, told Mortgage Introducer that affirmative action from the government was necessary to steer things in the right direction.

Specifically, he suggested that the government should “offer soft loans to householders in the same way they did to businesses during the pandemic”, enabling homeowners to spread the costs of their energy-efficient upgrades over several years at a lower rate of interest.

“Whilst the current reduced VAT charges on energy efficiency expenditure are welcome, they do not cover a wide enough range of products and are ultimately only a small help to hard pressed families,” he said.

“The net gain of reduced carbon emissions by insulating, allowing double glazing, and other energy efficiency and heat/power self-generation measures vastly outweighs the costs in terms of the environment. Again, the government could assist with medium term, in the region of 10-year soft loans to enable these properties to be brought up to modern energy efficiency standards.”

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All-Encompassing Guide To Responsible Lending & Debt Consolidation

When borrowing funds, it is common for prospective lenders to assess one’s financial assets and liabilities before dispatching money. Lenders evaluate your financial situation to determine your creditworthiness and reliability when paying off your loan on time. Responsible lending is the process that helps lenders to assess your ability to undertake a loan and make repayments without hindering your finances.

A debt consolidation loan is used to pay off multiple debts with a favourable interest rate and combine those payments into one. The borrower will pay one monthly fee instead of numerous charges each month. 

While it sounds like an ideal solution, consider its advantages and disadvantages before going ahead with debt consolidation loans. 

Responsible Lending

There are numerous short-term financing options that can help you obtain funds at short notice such as bridging loans and development finance. Both bridging finance and development finance loans offer investors a way out when facing a cash shortage. Irrespective of your choice of finance, responsible lending is a process that lenders rely on to predict your repayment ability.

Responsible Lending enables the lender to decide whether you are in a position to repay the debt promptly. The process entails a detailed analysis of the applicant’s ability to make repayments without disturbing their financial situation and takes into consideration how potential future changes to market conditions may impact an applicant’s ability to repay. 

Lenders utilise credit score examination to understand how well you have been managing your finances. Your credit score report acts as a catalyst for a potential lender. To ensure that you can repay the money borrowed, the lender often enquires about your income, monthly financial liabilities, and regular expenses. 

As per the FCA rules, credit card companies must monitor customers who get stuck in a ‘persistent debt’ cycle, including those who repeatedly make only the minimum monthly repayments over three years. 

Responsible lending practices reassure providers and assist customers struggling with repayments by either asking them to switch to lower rate products or suspending their credit cards to keep their debts in check. 

Financiers generally carry out all the necessary inspections before approving customers’ loan applications. However, the terms and conditions of the loan are subject to change anytime during the loan tenure, which may impact the customer’s finance. 

Debt Consolidation

Debt consolidation is the ideal solution for people with multiple debts who wish to merge all their outstanding balances into one single amount instead of making separate monthly repayments. Taking a new loan may enable you to settle all your debts and streamline your repayments as a single amount to be paid every month. 

In consolidated borrowing, there is no specific solution for everyone; interest rates on personal loans can be lower than other types of loans, however, applying for the advertised rate does not mean the lender will offer this. The interest rate offered varies depending on an individual’s circumstances and it is often necessary to have a good credit record to obtain a loan.

There are various options to repay debts, such as switching the existing debts from credit or store cards to a card with lower interest rates or even a 0% balance transfer, subject to one’s credit score. No interest is paid during the initial term, so your monthly payments will directly clear your debts. The interest rate will be applicable if you do not clear the balance before the initial period ends. Some cards may charge balance transfer fees up to 3%. Be aware of the promotional rates that only apply for a specific time.

Some options to overcome debt include working with creditors to settle the debt, using a home equity line of credit or getting a debt consolidation loan. Debt consolidation loans pay off multiple creditors and combine those monthly payments into one, sometimes at a lower interest rate. It sounds like an ideal solution considering both the pros and cons of debt consolidation. Debt consolidation combines two or more debts into a single more considerable debt. Often, consumers burdened with a high-interest rate take a step toward debt consolidation. In simple terms, debt consolidation gives you more favourable loan terms and potentially more competitive interest rates.

Advantages and Disadvantages of Debt Consolidation

Let us look at the advantages and disadvantages of Debt Consolidation:

Five Advantages of Debt Consolidation

  • Smooth Finances 

As debt consolidation combines multiple outstanding amounts into a single loan amount, it reduces the number of payments. You no longer have to worry about multiple due dates as you will only have one payment. Consolidation can improve your credit rating by reducing the chance of making a late payment or missed payments.

  • Accelerate Payoff

Debt consolidation sometimes incurs less interest compared to individual loans. In that case, you may consider making extra payments with the money you save each month. If debt consolidation leads to an extension of loan terms, you may wish to ensure that your debts are paid off early to see the cost saving. 

  • May Decrease Your Interest Rate

Bank of England figures reveal the average annual interest rates offered on credit cards have increased to 21.49% compared with the introductory rate of 0.1%. It is the highest average credit card rate since December 1998. However, the rates vary depending on your credit score, loan amount, and the length of your credit card term length. A lower interest rate may be available through a debt consolidation loan meaning more of your monthly repayment is used to clear the outstanding balance.

  • Could Reduce Monthly Repayment

Your overall monthly repayments may decrease with a consolidated loan by combining multiple payments into one monthly manageable figure. You may wish to increase the loan term to reduce your monthly repayment, however, you should take into consideration a longer loan term may cost more overall. 

  • Can Help You Achieve Better Credit Score

By consolidating your monthly repayments and outstanding balances you may see your credit score improve. Each credit agency has its system to calculate the credit rating in the UK; paying a single monthly bill is considered by these agencies to raise your credit score, as opposed to making the minimum payment across several different creditors.

Four Disadvantages of Debt Consolidation

  • May Add Up Extra Cost

Before going ahead with debt consolidation loans, make sure it does not involve additional fees such as arrangement fees, balance transfer fees, closing costs, and annual fees. Check the APRC (Annual Percentage Rate of Charge) before you sign the loan papers and ask the lender to confirm any other charges if you are unsure. 

  • You May Pay More Interest Over Time

Even if your interest rate goes down while consolidating, you could still pay more in interest over the life of the new loan. If you have extended the repayment term of your borrowing, although your monthly interest may be lower, interest on your loan will continue to be incurred for an extended period.  

  • You Risk Missing Payments 

Missing payments on any loan can impact your credit score, making it harder to obtain low-cost credit in future. It may also result in a financial penalty from the lender, which could increase your borrowing costs. To avoid missed payments you can enrol yourself in the lender’s autopay program or if you feel you can’t make a payment on time, whatever the reason, communicate with your lender as soon as possible.

  • Does Not Solve Underlying Financial Problems 

Consolidating debt can help to make debt more manageable, however, if you are habituated to living beyond your means, you may continue to borrow in addition to the debt consolidation loan. Making a realistic budget will help you to stick to your financial goals.

How Should I Consolidate My Debt?

Choosing to take a debt consolidation loan will depend on your financial circumstances. A few pointers when considering debt consolidation include:

  • A good credit score will give you a better chance of securing a lower interest rate than you have on your current debt, saving you money.
  • Your monthly repayment, interest rate, and repayment term are fixed, if you need a repayment plan to help reduce your debts a debt consolidation loan might be right for you.
  • If you do not like keeping track of multiple payments, a debt consolidation loan will combine all payments into one. 
  • Consider a debt consolidation loan only if you can afford to repay it, unlike credit cards where you the flexibility to make only the minimum repayment, a debt consolidation will have one monthly fixed repayment, and missing this could impact your credit profile.  

How Do I Get A Debt Consolidation Loan?

The following steps will help you to go ahead with a debt consolidation loan.

  • Lenders may have minimum credit score requirements; check your credit score to see if you meet the lenders standard for providing a consolidation loan. Inaccurate and incomplete information will lower your chance of getting a consolidation loan.
  • Decide your loan amount and add up the debt you want to consolidate to see how much money you need to borrow. Keep in mind arrangement fees may be added to the loan amount.
  • Thoroughly research various lenders; reviewing their websites will help you see eligibility requirements, loan terms, and fees. You can also take a debt consolidation loan from a bank.
  • Prequalification will give you an estimate of the loan rate and terms. Lenders generally use a soft credit check to confirm your eligibility, so your credit score will not be affected. 

While debt consolidation has several merits, it is essential to weigh up your options.

UK Property Finance is an FCA authorised financial services provider offering a wide range of services ranging from residential mortgages, secured loans, commercial finance, bridging loans and development finance

Depending upon the nature of your project, its status and stage, customised solutions are offered by our highly experienced team of professionals, who assist you in selecting the right product, the right loan amount and the tenure, the very best interest rates and complete details on repayment options. Contact us today to learn more about the best finance options available.

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Living Cost Crisis Forces UK Households to Dip into Savings to Survive

The general picture for mortgage payers across the UK is becoming increasingly bleak. At no time since the historic recession of 2008 have more households struggled to keep up with their mortgage repayments. As the living-cost crisis continues to escalate, things are only likely to worsen before showing any signs of improvement.

New figures from Octane Capital, a specialist property lending company, suggest that average monthly mortgage payments in relation to average salaries are breaking almost every record in the books. Taking the current average property price of £276,019 along with a 75% LTV mortgage on a 3-year fixed-rate deal, the average homebuyer is currently looking at a loan size of just over £207,000 – assuming they pay a deposit of 25%.

Charged at an APR of 1.84% and taken out over 25 years, this all adds up to a standard monthly repayment of just under £860.

Across the UK, the average earner’s gross salary currently stands at £31,447 – or £2,621 per month. This would therefore mean that a monthly mortgage payment of around £860 would immediately wipe out almost 33% of this average earner’s monthly income.

This is 3.1% higher than in 2011, 4.7% higher than in 2017, and a full 5% higher than the beginning of 2020, just before the pandemic hit. In fact, the exact figure, 32.8% of the average earner’s salary going on mortgage repayments, was only higher during the 2008 recession, when it hit an unprecedented high of 34.3%.

Interest Rate Hikes Hit Households Hard

The overwhelming majority of households across the UK have been hit hard by a string of recent interest rate hikes, compounded by record-high energy bills and unprecedented inflation. 

“The cost of living crisis is a current cause of great concern, and many homeowners are not only combating the inflated cost of day to day living, but also the monthly cost of their mortgage following a string of interest rate increases,” said Octane Capital CEO, Jonathan Samuels.

“At the same time, wage growth has simply failed to keep pace with these rising costs and so the proportion of our income required to cover our monthly mortgage commitments is now substantially higher than it has been for many years.”

Far from any real light at the end of the tunnel, most experts believe things are only set to worsen before there are any signs of improvement.

“Unfortunately, this cost only looks set to increase as we expect to see interest rates increase further throughout the year. The best advice for those currently struggling is to consult a mortgage professional and see if they can swap to a product offering a better rate. For those currently looking to buy, it’s vital to factor in any potential increase and not to borrow beyond your means based on current rates,” Mr Samuels warned.

“While the current cost of borrowing may still remain fairly favourable, it’s vital you consider what any further increases may mean for your financial stability, as those borrowing right up to their limits initially are sure to struggle further down the line.”

Mortgage Payers Forced to Dip Into Savings

During the pandemic, many households took the opportunity to amass considerable savings. Making the best of a bad situation, those who suddenly found themselves confined to their homes also found themselves with fewer ways to utilise their disposable income.

Unfortunately, this broad financial safety net is not going to help the approximate 17% of households across the UK that do not have any on-hand savings at all.

That is according to a report published this week by the Yorkshire Building Society, which also suggests that almost 40% of savers have been forced to dip into their savings to cope with the escalating cost-of-living crisis. Among which, 17% said that they had already spent at least £1,000 from their savings on everyday living costs.

Around 4,000 households were polled by YBS, with questions on their saving and spending habits over the past couple of years. While many benefited from a long period of capped spending during the height of the COVID-19 crisis, the results of the poll suggest that a sizeable proportion of households are saving less than they were a year ago, or not saving anything at all.

Inadequate Support for Struggling Households

As promised, chancellor Rishi Sunak outlined the government’s relief package for struggling households on May 26. Mr Sunak confirmed that £15 billion had been set aside to help households cope with skyrocketing living costs, and that the poorest citizens would receive the most support.

However, a £400 discount on energy bills for every household and a £650 one-off payment to the poorest eight million people was criticised by many as insufficient. With further energy price increases on the horizon, the vast majority of UK households are destined to find themselves further out of pocket as the year progresses.

Elsewhere, others have praised the government for at least taking some form of action, albeit at a relatively late stage in the game.

“We know that other countries in Europe have taken measures to help households with their energy bills, so this is obviously very helpful from an economic perspective, unlike the previous plan that was made available in March,” said Nitesh Patel, strategic economist at Yorkshire Building Society, in an interview with Mortgage Introducer.

“The government’s measures are really quite important because we know that there are a lot of people in this country who don’t have any form of savings,”

“If a large proportion of the population starts to reduce their expenditure in other parts of the economy, then I think we could be in a very, very difficult economic situation.”

Further Financial Difficulties Expected

According to YBS, around 40% of UK households expected to see their monthly outgoings increase by between £100 and £500 over the course of the next 12 months. Among those polled by YBS, 70% cited utility bills as their biggest cause for concern, followed by 60% who are already struggling with food and drink prices, and 58% worried about fuel prices.

While being interviewed by Mortgage Introducer, Mr Patel was asked to share his thoughts on projected mortgage demand over the rest of the year. As mortgage rates increase and the living-cost crisis worsens, prospective first-time buyers will be forced to reconsider whether or not they can realistically afford to own their own homes.

“The first thing to bear in mind is that many households who have managed to build up their savings are still in a fairly reasonable situation, because the cost-of-living crisis has really only accelerated in the last three months, so they’re still okay at the moment, and there are obviously still some very good deals out there available for mortgages,” Patel said.

“In terms of mortgage demand, it is still very, very strong relative to supply. And that’s probably because mortgage rates are still very, very low,”

“We know that in the current environment, people who are economising are probably not going to spend money on areas that are not really essential – and that could have a similar effect on housing.”

Mr Patel said that in all likelihood, home purchase activity among first-time buyers will most likely decrease over the next six months. But as demand for affordable homes continues to outstrip supply by a significant margin, this is unlikely to have an adverse effect on sky-high property prices.

He also predicted a further spike in inflation beyond 10% by the beginning of next year, triggered by the upcoming energy price cap increase coming this October.

Millions of Households on the Brink of Economic Disaster

With inflation already running at its highest level in almost three decades, more households than ever before are finding themselves on the brink of outright economic disaster.

A recent study conducted by KIS Finance found that even before the most recent cost-of-living increases, a full 57% of UK households were already experiencing financial difficulties, or expected to struggle financially in the near future.

Bank of England base rate increases have had a major impact on mortgage affordability, resulting in millions of mortgage payers struggling to make ends meet. While all this has been going on, Moneyfacts reports that around 520 mortgage products have been withdrawn from the market over the past month, as banks become increasingly stringent with their lending criteria.

In total, KIS Finance reports that around 25% of adults across the UK are currently experiencing severe financial difficulties. Worse still, all indications point to further economic issues to come, as real wages are predicted to be lower by 2026 than they were in 2008.

The October energy price cap increase coupled with the elevated energy consumption during the winter months could add up to the perfect storm for households that are already struggling.

According to KIS Finance, younger households have been hit particularly hard by the living-cost crisis – around 35% within the 18 to 24 bracket saying their current financial situation is anything but stable. In addition, 24% of people aged 18 to 34 are earning less now than they were at the beginning of the pandemic.

Given the extent of the crisis, the support package outlined by the Chancellor – a £400 discount on energy bills for every household and a £650 one-off payment to the poorest eight million people is understandably being seen as a drop in the ocean for those worst affected.

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Inflation on Property Prices remains at 11.2% but Signs Show an Expected Slow Down in the Property Market

According to a report by Nationwide, property price inflation is currently stuck in double digits, but it is predicted that we will soon see a slowdown in the market.

The average home price has dropped from a growth of 12.1% in April to 11.2% in May. The current average property price sits at £269,914, equating to an increase of £27,082 from the same time last year.

Nationwide remarked that the property market was faring better than predicted despite the spiralling cost of living and recent mortgage rate increases, but that we should expect to see the rise in home prices slowing down in the coming months.

Robert Gardner, Nationwide’s chief economist said: ‘Despite growing headwinds from the squeeze on household budgets due to high inflation and a steady increase in borrowing costs, the housing market has retained a surprising amount of momentum.

‘Demand is being supported by strong labour market conditions, where the unemployment rate has fallen towards 50-year lows, and with the number of job vacancies at a record high.

‘At the same time, the stock of homes on the market has remained low, keeping upward pressure on house prices.

‘We continue to expect the housing market to slow as the year progresses. Household finances are likely to remain under pressure with inflation set to reach double digits in the coming quarters if global energy prices remain high.

‘Measures of consumer confidence have already fallen towards record lows. Moreover, the Bank of England is widely expected to raise interest rates further, which will also exert a cooling impact on the market if this feeds through to mortgage rates.’

Since the beginning of the pandemic house prices have seen such a rapid increase that, when compared with the average income, the cost of buying property has never been higher. This impacts affordability and has resulted in many potential buyers being totally priced out of the market.

The ratio of earnings to house price, has increased from a long term average of 4.5 to an alarming 7 times.

Previously buyers have been able to take advantage of low interest rates to buy more expensive homes, however with the recent interest rates being increased four times in succession by the Bank of England, from 0.1% to 1%, affordability has taken a serious hit.

Over just a year, fixed interest rate deals as low as 1% have risen to just under 2.5% for a similar mortgage. This impacts negatively on the amount buyers are able to borrow, particularly at this time, when cost of living expenses and the energy crisis are already affecting how much people can spend.

Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages said: ‘The tide could be turning as a number of clients who have been house hunting for the past six months are now finally getting offers accepted where, before, they were consistently being outbid by other buyers. 

‘A lot of buyers currently are committed to the idea of moving but once they finally complete we believe the housing market could start to dramatically change with a lack of new people considering moving.’

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