Regulated bridging and the legacy of the interest only mortgage
Sounds like Harry Potter for finance geeks but in fact this could be some relevant reading if you are a mortgage broker or IFA with clients at the end or nearing the end of their interest only mortgage.
Regulated bridging has risen recently and has been well documented. This article aims to explain one reason for this, the legacy of the interest only mortgage.
We are seeing more and more clients at the end of their mortgage term where they are in the unfortunate position of having to downsize or use equity release / later life lending products to repay the interest only mortgage
Whilst not a position that is desirable it’s a position none the less. No one can change the lack of strategy to ensure repayment of the interest only mortgage and there is no point blaming the advice given originally as finger pointing into the history books isn’t going to conjure up a solution.
Whilst well known and I would argue pro actively considered, later life mortgage products or equity release might not always be appropriate so a bridging loan if advised on correctly can be an appropriate solution. I would argue this can be over looked due to the perception the product has but if handled correctly it can be a fantastic solution.
Put simply, the bridging loan repays the interest only mortgage and eliminates any legal proceedings and forced sale by the mortgage lender. The bridging loan term then allows the client time to market their property or increase the marketing activity to sell their property to then exit the bridge.
A lot of these applications can be quite delicate and require a sensitive approach. They can be risky to so sensitivity has to be sometimes coupled with blunt advice too.
Daniel Yeo, Managing Director, Specialist Finance Centre