How bridging loans can help en bloc sellers

20/03/2018

Owners of residential projects sold in the current en bloc hype are being advised to quickly secure a replacement property with the help of bridging loans, as housing prices continue to recover.

“You do not want to wait several months when prices are moving, you want to secure your new place as soon as possible,” said Bala Balamurali, director of London-based lender Market Bridge Solutions (MBS).

MBS’ parent company Market Financial Solutions (MFS), which has been operating in the UK bridge lending business for more than 10 years, recently opened its first overseas office here to offer bridging loans for property purchases and business purposes.

Approval only takes one to two days, with the funds disbursed within three weeks, as long as the borrower meets certain requirements including compliance with local regulations.

“We believe that the financial landscape of Singapore is suitably positioned for bridging loans, particularly in light of the exciting real estate projects we are seeing across the city,” said MFS’ chief executive Paresh Raja.

Aside from en bloc sellers, buyers of auction properties can also consider taking out this loan, given the tight timelines typically imposed by auctioneers.

According to latest data from the Monetary Authority of Singapore, outstanding bridging loans granted by banks here rose from $28.9 million in Q2 to $40.4 million in Q3 2017.

But local banks currently don’t offer this kind of loan facility to en bloc sellers, noted Eugene Huang, head of Redbrick Mortgage.

“Due to the complexity of en bloc transactions, Singapore banks currently do not issue bridging facilities to en bloc sellers. However, we understand that some banks are exploring to grant bridging facilities for such transactions,” he said.

iCompareLoan’s chief mortgage consultant Paul Ho agrees with Huang.

“Bridging loans only address the sale of HDB or private properties and those with equity. A bank will consider lending to property sellers who are buying another property.

“The maximum loan duration is only six months. However, collective sales are not considered mainstream and banks have not dabbled into it,” said Ho.

Furthermore, this type of loan also has disadvantages, noted Huang. For instance, conveyancing fees are typically $300 to $500 higher if there is a bridging facility.

“Interest rates are charged at three percent to seven percent depending which bank you take the loan from. Some banks charge a cancellation fee. Some charge by days, while some charge by month,” he added.

Adapt From:PropertyGuru March 20, 2018


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