Property is still one of the most attractive investment options around, and real estate still offers an attractive rate of return without a great deal of risk. Putting savings into property is a good way to earn a little bit more without exposing yourself to the uncertainty and volatility of the stock market, and while it may not be the most flexible investment, the continuing rise of house prices makes property a sound and productive investment.
As well as providing an excellent method for savers to invest their money, buy to let property is also a fast-growing sector of the UK’s property market. Property developers have been quick to expand their portfolios with real estate that can generate a profit, and have continued to grow despite the tightening restrictions on the BTL property market. In order to ensure that their investments are secure and stable, property developers must find a way to arrange a fast and flexible financial solution, and bridging finance provides a perfect option. In addition to being a quick and straightforward way to arrange a loan, bridging finance can also be used to purchase property which cannot be purchased with a mortgage; this allows developers to seize the chance to buy property at a bargain price.
When considering any form of finance it’s important that borrowers appreciate the responsibilities they have to their lenders. Bridging finance is a form of secured borrowing, which means that if the borrower fails to repay then their lender can reclaim the value of the loan by repossessing their property; this means that while a developer can leverage their existing assets to expand, they must be careful not to overextend themselves. Anyone considering a bridge to let loan, whether they’re a private or commercial customer, must make sure to consult a qualified financial advisor before committing themselves.
When investing in a buy to let property, it’s important to secure a stable source of finance before proceeding. In many cases, this will consist of a buy-to-let mortgage, but there are many situations in which a mortgage is not the best choice for the purchaser. There are several drawbacks with mortgages which can cause them to be inappropriate for real estate purchases:
Mortgages take a long time to arrange, typically upwards of a month
Mortgage providers have a very strict lending criteria, and will require borrowers to fulfil their checklist before approving a loan
Mortgage providers are inflexible and deal with many thousands of customers; they do not treat customers on a case-by-case basis and cannot alter their products to meet different needs
Buy-to-let mortgages are also very expensive, typically costing significantly more than a standard residential mortgage
In situations where a mortgage is not an appropriate source of finance, buy-to-let investors may instead turn to bridging finance as an alternate source of funding. Bridging loans are a much more flexible way to finance a property purchase, and can be used to quickly secure property that would otherwise be unobtainable. These loans are so called because they are a short-term “bridge” that helps buyers to cover the gap while long-term financial arrangements are put in place; a buyer can pay for their new property before obtaining a mortgage.
This can be invaluable in many situations, because it’s not always possible for a buyer to source a mortgage before buying their property. Below are a few of the most common situations in which bridge-to-let is a valuable alternative to mainstream lending:
If a property is sold at auction, or the seller needs to move quickly in order to pay off debts of their own, it can be necessary to close a sale within a few weeks. Mortgage lenders simply cannot work to this timescale, so a bridging loan must be sought instead; bridging lenders work to an exceptionally fast timescale and are often able to provide funds within just 7 days. This empowers property developers to purchase property at auction, secure in the knowledge that they will be able to obtain finance in a short space of time.
Any property that is not in a habitable condition cannot be mortgaged. This means that any house in need of renovation must be secured through alternative finance, rather than through a mortgage, so any landlord looking to buy a house, fix it up and let it out must turn to bridging finance instead. Many bridging lenders will provide loan packages that are specifically designed to enable borrowers to purchase and refurbish a buy to let property, combining both loans into one streamlined lump sum.
Properties with a short lease are very often unmortgageable, with few mortgage providers offering to finance properties with fewer than 70 years remaining on their leasehold agreements. Because of the expense of extending a lease these properties are often offered at a discount price, but buyers will need to use bridging finance in order to secure the property and extend the lease before securing a mortgage.
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.
Bridging loans can be used for a wide variety of purposes. Perhaps the most common purpose is to allow you to buy a new home or business premises before you have sold your existing property. They can also be used by investors to buy property at auction, landlords to acquire buy-to-lets, developers to acquire and renovate properties and businesses to raise working capital. There are a myriad of different uses and Bridging.com can help to find the best loan for you.
Loans generally range from £10,000 to £50M with smaller or larger amounts provided on an exceptional basis. The value and equity within the property or properties you are securing against will determine how much you can borrow. The maximum loan to value (LTV) currently offered by most lenders ranges between 65-80%
Bridging.com can help you secure a bridging loan tailored to your own unique circumstances in a matter of days. We can guide you through the entire process from initial enquiry to funds being released in the shortest possible timeframe.