Why we’re bucking the trend on bridging loans

Why we’re bucking the trend on bridging loans

60% of high net worth individuals are thinking about downsizing their properties. But frequently they find that getting a bridging loan is not as straightforward as they expect, constraining the time they want to find their perfect property. Graeme Morris explains how having a close relationship with clients, and treating everyone as an individual, can make this much simpler.

Graeme Morris, Banking Director
Downsizing

Turning a house into a home can take years, decades – generations even. So when the time comes (often later in life) to downsize to a more manageable property, the process can seem daunting, with potentially a lifetime of emotion invested in it.

It’s an issue that’s on the mind of a lot of high-net-worth homeowners. 60% of people we surveyed in the Hampden & Co Property Finance Review 2019, published in association with The Times, said they were ‘intending’ or ‘considering’ downsizing from their current home at some point in the future.

The reasons I hear for downsizing are as unique as all my clients, but considerations frequently include the house has become too big for them, the children may have grown up and left home, or the garden too large. I recently had a case with a client where they were simply tired of the number of stairs that they had to contend with. Sometimes the move is not motivated by the property, but by the location as there may be a desire to move nearer the children or grandchildren, or simply to move a favourite part of the country. Over and above all this, the main reason given by respondents to our survey was ‘to release equity to support the family’.

My colleagues at Hampden & Co and I, have supported many clients through these scenarios – and one distinctive way in which we can often help is through a bridging loan.

The reassurance of time

Bridging loans enable you to finance a new property before you have sold your existing one but, for many people, what they really are after is the reassurance that they have time to find what it right for them. Buying a new home can be stressful enough without having to synchronise everything so that you sell your existing property first to pay for the new one. Many high net worth homeowners prefer to take the time to find the ideal new home, buy it, and then sell their original home at a price and time they are comfortable with, which can be a significant period for more substantial properties.

We’re receiving a lot of enquiries about bridging loans these days, partly because very few high-street banks offer them anymore. A small number do offer closed bridging loans, which are granted when the lender knows exactly how and when the loan will be repaid. But open bridging loans – a more flexible option that does not mandate an exit time or strategy – are much harder to find, and we do also consider these where the circumstances require.

And dealing with high-street banks over property finance of any kind can be a frustrating experience. Only three out of 10 of our research respondents said they felt they had been treated ‘like people’ when applying for a mortgage with mainstream lenders, a collective experience that I expect would be similar or worse for attempts to secure a bridging loan.

Flexible, bespoke solutions

One way in which Hampden & Co is different from the majority of banks, is that we meet all our clients in person to get a full understanding of their personal and financial situation. Many of our bridging loan clients, while wealthy, can have complex financial circumstances, delicate personal circumstances, or both. My colleagues and I enjoy the opportunities to understand these situations, and to help clients find a solution that works for them and their families.

Helping people secure financing for their property needs continually reminds me that homes are much more than bricks and mortar. I quite like the quote by the American writer Charlotte Perkins who states: “The home is the centre and the circumference, the start and the finish, of most of our lives.” In my experience this is particularly true at the point that people are downsizing, and one of the real highlights of my role is to be able to help clients at this pivotal time.

If you would like to discuss any of the above, please do get in touch, my email is Graeme.Morris@hampdenandco.com, or you can call me on 0131 297 0155.

Please remember that all borrowing is subject to status and is available to persons of 18 or over. Security might be required for borrowing in the form of a charge or standard security over land, or other forms of security over your investments or other assets. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.