The use of international bridging finance is very different in Europe compared to the UK. In the UK such funding is often seen as a means of financing long term property investment as opposed to simple bridging finance awaiting settlement of a house sale. Bridging finance in the UK is regularly used to fund renovation/redevelopment allowing the refinancing of property assets after a potentially significant uplift in value. We have a number of UK clients in particular looking to use their international property portfolios as collateral when negotiating international bridging finance.
Restrictions on international bridging finance
In many ways the UK market is more liberal and outward thinking than any other financial market in the world. If you require finance, and you have security, there is not much which is not up for negotiation. The European market is slightly different with a number of subtle yet significant anomalies. Did you know that:-
- German lenders cannot charge more than twice the standard interest rate on loans
- Spanish homes are often passed from family to family and seen as a possession as opposed to an investment
- Some foreign countries will not accept international mortgage applications based on sterling income streams
So, it will be no surprise to learn that these subtle restrictions in some European markets have reduced overseas competition in the international bridging finance sector. It is also fair to say that the UK international bridging finance sector is one of the most competitive in the world. Mainstream banks and specialist mortgage companies are more than happy to accept international property as collateral for short-term bridging loans.
Structuring bridging finance
In theory, the structure of a bridging finance arrangement is fairly straightforward. Funds are released at a predetermined interest rate on a short-term basis. In this instance, they are backed by international property assets which more than cover the lenders financial exposure. The short term nature of such transactions means relatively short-term exposure to currency movements. However, currency movements are still a risk which cannot be ignored.
There are ways and means of mitigating currency risk, especially for short-term transactions, which will assist in obtaining a more competitive rate of interest. We have significant experience and contacts in this area. As a consequence we can offer a bespoke service and a holistic approach to a customer’s overall financial well-being.
Different jurisdictions, different laws
We find many people fall into the trap of assuming that laws in foreign countries will reflect those in their homeland. As we touched on above, in relation to financial markets in Germany and Spain, this is not necessarily the case. Therefore, we believe that our bespoke approach to international bridging finance offers protection, encourages competition and creates a favourable outcome for our customers.
Enness Mortgages has a growing number of overseas offices as we extend our international footprint and influence. We have access to localised legal advice in countries across Europe and around the world. As a consequence of our experience and contacts we have been able to overcome many legal challenges on behalf of our customers. We have succeeded where many have failed.
If you are looking to use your international property portfolio as collateral for international bridging finance we are confident we can assist. Please feel free to give as a call at any time, whether you have begun the process or are simply assessing your options.