BESPOKE / CREATIVE / FLEXIBLE
Properties You Can Finance with a Bridging Loan
When it comes to investing in property, there are not many financing options that are as versatile and flexible as bridging loans. Especially when a property developer is dealing with a situation in which they need to secure financing quickly, bridging loans have distinct advantages when compared to other types of development
Not only do they offer the most flexible lending options with quick approvals that don’t require incredibly detailed checks, they are also usually the cheapest option since they are to be paid back quickly and don’t involve years of interest payments.
If you’d like to learn more about bridging lending and see if this type of development finance is the best option for your development project or property purchase, don’t hesitate to get in touch with one of our financial experts.
Why Bridging Loans Are Perfect As Property Development Finance
The most obvious advantage that this type of loan offers compared to other types of finances is the speed at which every aspect of the loan moves along. They are the quickest to get and also the quickest to pay off, which allows individuals or businesses who are interested in the purchase, development, or renovation of property an option that will save them both time and money.
Let’s take a look at some of the types of properties and projects you can finance with a bridging loan and other property-related situations in which this kind of loan can prove to be the best option for you.
When you are looking to buy a property at auction, time is of the essence and speed is the name of the game. You will typically need to pay a 10% deposit for the property you want to buy on the day of the auction and pay out the rest within the next 28 days.
Funds may not be available to you right away since your capital is usually tied up in other assets or property, which is why a bridging loan is usually the best way to secure the finance you need to purchase property at an auction when you need to make a quick decision.
The quick completion and instant exchange of funds that a bridging loan can provide you make this type of financing a perfect option for buying property at auction.
Banks often look at uninhabitable properties that need to be completely renovated and restored as being unsuitable for commercial mortgages. However, these types of properties can be excellent opportunities for those who are willing to invest in completely refurbishing them and making them inhabitable once again.
As long as your strategy is sound and the lender sees your exit strategy as secure, you can secure a bridging loan no matter the current condition of the property. Bridging lending is the perfect solution for a property investor that wants to cover the costs of renovating and restoring an uninhabitable property to either sell for profit or refinance the property via more traditional lending channels once the property has been refurbished.
Buying a Home
If you are looking to purchase a home for yourself, bridging loans enable you to act quickly and close on a home you like immediately, acting as if you were a cash buyer. This is an especially convenient option for those who want to finance the purchase of a new home by selling their old one without having to wait until the current home is sold in order to have the financial means to purchase a new one.
Bridging loans allow you to act quickly so you don’t miss out on the property you want to purchase while waiting for your current property to be sold, which can depend a lot on the current state of the real estate market.
Bridging finance is also a perfect solution for property developers and traders, especially those who want to develop a property quickly and sell it to make a quick profit. This form of loan enables you to borrow large sums quickly in order to make sure that you meet your development deadlines and are able to sell the developed property on time.
Furthermore, commercial property developers can also use bridging lending if their development project looks as if it’s not going to meet a deadline. If you are working on a development project and you need more time to complete it, you can gain access to the development finance you need in order to realize your plans as quickly a possible.
In property development, bridging finance allows property developers and commercial property investors the flexibility and property development finance needed to complete the work according to their ideal deadlines so that they can be certain that they will be able to sell or refinance exactly when they need and want to.
How is the Maximum Loan To Value (LTV) Calculated:
Preventing Property Repossession
Bridging lending also presents an optimal solution for maintaining a property that is due to be repossessed. This form of property finance can provide you with the funds you need to pay off any outstanding debts on your property to prevent repossession by the bank.
Even if you want to sell the property eventually, a bridging loan will give you control over the situation, allowing you to prevent the repossession in order to avoid a forced sale situation in which you will not be able to make a profit in most cases.
Lenders that repossess a property in order to settle any mortgage balances that are outstanding will look to sell the property quickly, which usually means that the price at which they will be offering the property will be significantly below its market value, which might not even cover the entire debt that you owe on the property.
This type of loan allows you to pay off the entire mortgage and then sell the property on your own terms and for the price you want when the market price is right.
Buy to Let Property
If you are looking to purchase a buy to let property in order to rent it out for profit, a bridging loan could be the best way to do so, especially if you don’t have the cash you need to make the purchase right quickly.
Would-be renters can take out a bridging loan, purchase the property they want to let, and start paying back the loan as soon as the rent payments start coming in from your tenants. This form of property finance gives you the freedom to act quickly and make buy to let property purchases even when your assets are tied up and you don’t have the cash needed to make an immediate purchase or apply for a buy to let mortgage.
If the property is ready to rent, and the property market is promising, your lender will see that as an acceptable exit strategy for paying back the loan and will approve your bridging loan swiftly.
Buying Machinery or Equipment
When it comes to financing property purchases using a bridging lender, the concept is not restricted to buildings and land. Businesses can use bridging lending to buy other property that might be crucial to the success of their organisations, such as machinery and other business equipment.
Sometimes the difference between success and failure in business is how quickly you launch, especially in competitive property markets. A bridging lender can give you the advantage of being first-to-market by providing you with the cash injection you need to get off the ground.
The Main Advantages of Bridging Lenders for Financing Property
The most prominent advantage of bridging lending compared to other financing options is that they can be arranged very quickly and that they are incredibly flexible in nature.
If your property investment plan is time sensitive and you need a large amount of money quickly, bridging is the best option available to you.
The criteria for obtaining one are significantly more relaxed than is the case for any other lending option available to you.
As long as you present a viable exit strategy for repaying the loan and the security you are offering is acceptable, your chances of being approved for this type of loan are exceptional.
Options for Securing a Loan Against a Variety of Property Types
Another very important advantage of bridging lending is that lenders will consider just about any type of property as security for the loan. Bridging lenders will consider commercial or residential property, development land, warehouses, building plots, and even farmland as security.
Using Multiple Properties as Security
You can use two or more properties to raise a loan if necessary. As long as there is equity in the properties, that money can be used by the borrower to raise the funds needed for a property purchase or development project.
Using Unusual or Non-Standard Properties as Security
What is considered non-standard or unusual property? This usually means that the properties were constructed using materials such as wood, concrete, or steel frames. It’s usually very difficult to obtain a mortgage on these types of properties that aren’t standard brick-and-tiled-roof constructions, but most bridging lenders will accept these types of non-standard structures as viable security.
Using Neglected Properties as Security
Even properties that aren’t in pristine shape or order can be used as security. Most conventional providers of commercial mortgages will deem derelict property that is in need of serious repairs as unacceptable. However, bridging lenders will accept such property as security in most cases.