Using a buy-to-let property to get bridging finance so that you can borrow money secured against that property.
Whether a property investor is seeking funding for a quick-fire “flipping” opportunity or a longer-term purchase and development project short-term funding can provide the answer. Residential bridging loans can be tailored perfectly to each type of job.
By way of clarification when investors “flip” a property it means that they purchase it at a low price and then sell it on almost immediately for a healthy profit. To do this they need access to flexible, fast funding over a very short period. As detailed above, a very short-term bridging loian can be ideal.
For the investor that wants to maximise the value of an investment property they will often require funding over and above that required for the initial purchase. Whether they are looking at a light refurbishment, a full renovation or a complete redevelopment these investors will require a longer-term bridging or development loan.
They will need a loan that allows them to secure the property and then additional funding to turn their plans for the property into reality. A longer-term bridging development loan can then be repaid from the proceeds of sale or taken out by new longer-term funding on the newly renovated property.
For residential investors, whether they are flippers or developers, they will look for loans to maximise their returns by leveraging the size of their own commitment. Lenders generally want to see investors provide a level of commitment often referred to as “skin in the game” whilst investors will often seek to limit their own investment preferring to use someone else’s money rather than their own.
Money saved on the purchase can be spent on works or indeed on the investors next project. As well as the quantum of their own stake investor developers will also seek to obtain the most suitable term and the best rate. For obvious reasons residential investment loans are considered higher risk than owner occupied loans; it is much easier to walk away from a property you don’t live in but despite this they are still incredibly popular in a booming property market.
A bridging loan is a short-term loan secured against property. It allows you or your business to “bridge a gap” until either longer-term finance can be arranged, or the underlying security or other assets can be sold.
Yes. Any advice that concerns a property which you have ever lived in is regulated by The Financial Conduct Authority and your broker must be registered by the FCA.
No. Some brokers specialise in complex bridging finance for property developers and as such choose not to offer regulated residential property loan advice.