Bridging Loans for your Property Portfolios or Housing Development
- Development & Bridging
Ideal if you require fast access to a secured short-term loan, or need to overcome a specific issue or to complete on a property quickly.
Bridging Loans are ideal for property developers and investors that need to purchase quickly on land or properties, with an option to sell (using a flip strategy) or refinance, within a limited time-frame.
Bridging Loans can be fast – when you are looking for a bridging loan provider, make sure they know the time-frame you are working to and check that they are able to deliver in that time-frame. Don’t be afraid to ask questions and certainly don’t waste your time with a provider who won’t be able to deliver. Find a Lender/Funder who will do the deal, as opposed to ones that offer great interest rates but won’t fund your deal!
Property bridging loans are a way of gaining quick access to capital. When you find the perfect property or development, you may only have a small window of opportunity within which to complete the sale – this is particularly true when the deal you have in mind is on the market for a great price and something you don’t want to miss out on.
You can access funds quicker than you could if you were using other forms of borrowing. And, this way, you can ensure that you have the funds you need within your deadline, and are able to secure the transaction in good time. This is subject to providing the requested documents to the lender and your solicitors
In certain circumstances, it might even be possible for you to raise 100% of the purchase price, purely through a property bridging loan.
Bridging Finance is Flexible – Have an Exit Strategy
Bridging Finance is intended to be quick short-term finance and although the flexibility of this lending method is fantastic, having an exit strategy in place is crucial to avoid running into difficulty. Your broker can discuss the possibilities with you at the time.
Bridging Finance can be much more flexible than high-street lending or traditional mortgages. Mainstream lenders will often require more information from you than bridging finance lenders. They will need a lot of information about your income and credit history before they will agree to a loan. And, of course, if you do not meet their criteria, then they will not give you the money.
Bridging Finance Lenders, on the other hand, will need to know about the property, as it is the property that is used to secure the loan (the sale of which is your exit strategy for the loan repayment). There are also funding options available at a lesser interest rate to use as your exit strategy.
The repayment terms can often be amended to suit you, within the confines of the agreement.
A Bridging Loan Can be Used For Almost Any type of Property and can be used on Properties you Already Own.
If you own properties already that are unencumbered (without any finance secured against them already), then this will give you more options when it comes to securing a bridging loan But, this isn’t to say that you can’t secure a loan against a property that has finance against it already.
You can secure a bridging loan for any type of property.
When you are applying for a bridging loan, the property (that it is being secured against) is one of the most important factors.
Luckily, these loans can be used to purchase all types of property, including houses, flats and apartments, commercial units, land, shops and large developments. So, whether your strategy is investing in serviced apartments, investing in buy-to-let or building a large housing development, then a bridging loan is an option that is open to you.
This also means that you can access finance for a new addition to your property portfolio regardless of the type of property you want to secure the loan against. In other words, you can secure the loan against a property you currently own, rather than the one you are using the loan to buy.
Property Development is All About Careful Planning
If you own properties already that are unencumbered (without any finance secured against them already) then this will give you more options when it comes to securing a bridging loan.
This isn’t to say that you can’t secure a loan against a property that has finance against it already. Bridging loans can support you throughout a property development project and this can be essential for property developers and traders.
Should you be looking to buy a property to develop and then sell on in a short space of time, it may be that you cannot access the finance that you require at the time it is most needed. This could mean that you are unable to complete the work that you would like to do on a property.
Or it might mean that more time is unnecessarily spent on the development, or that you end up holding the property for longer than you wanted to.
A bridging loan allows you to access the financial help you need quickly and can provide money in stages throughout your renovation project – this of course means that you can complete the work according to your ideal deadlines and the loan paid back when you sell or refinance.
Renovating Uninhabitable Houses – Bridging finance can make those big renovations projects possible.
Most high-street lenders will not provide finance for property investors to renovate uninhabitable properties as these types of projects can be seen as high risk. Although you might be able to see amazing potential in a property, it might be difficult for you to secure the funds that you require.
Properties which do not have kitchens, bathrooms or even running water may appeal to those who would like to start a renovation project from scratch; but most mainstream lenders will simply not lend money for these types of properties.
One answer is to take out a bridging loan to cover the costs of repairs and renovations until the property has reached a habitable condition.
Following this, you would be able to take out a mortgage or sell the property, using the profit to help fund your next project.
Most importantly, you will need a good contingency plan so that you don’t get hit with large, unexpected development costs.