Bridge to Let Finance

Buy to let properties are a great way of securing a productive investment, and landlords can use bridging loans as a fast and flexible way to purchase property

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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.

Bridging Loans for Buy to Let

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:

Quick Purchase:

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.

Refurbishment:

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.

Lease Extension:

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.

National Association of Commercial Finance Brokers Financial Services Authority Association of Short Term Lenders Association of Bridging Professionals

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