Purchasing property can be expensive in its own right, let alone refurbishing and developing property in an effort to increase its value. As such, it is unlikely that you have enough spare change lying around to afford purchasing a property without a bit of help. One option to help you afford this kind of big purchase is bridging loans. Read on to find out how bridging loans for property development may be the right option for you.
What is a bridging loan?
Bridging loans are a type of loan that can provide the recipient with a large sum of money at short notice. This is done by putting up one or more of your assets as security to meet the value of the loan. While they are an effective solution for property developers, the application of bridging loans does not end there. They can be used to fund private home purchases, legal settlements, paying urgent bills, funding business ventures, and more. Now onto the more important part – how they can help you.
Quick access to funding
Finding the perfect property can take a long time. But, as much as we would prefer otherwise, the window of opportunity can often be quite narrow, even more so when the perfect property comes at the perfect price. To ensure you get to add your chosen property to your portfolio, you need to act fast.
Compared to other forms of borrowing, bridging loans can provide the necessary funds at very short notice. Allowing you to cover the cost of your desired property exactly when you need to. A further advantage to bridging loans is that you could even cover the entire price of your purchase through the loan itself.
Flexible finance
With other more commonly used forms of borrowing, such as mortgages or high-street lenders, the amount of information required to take out a loan can often be quite extensive. Details including your current income and credit history can be subject to lengthy examination. With your application usually being rejected if you do not match their specific criteria.
In contrast to this, bridging loan lenders will simply want to know the value of the assets you are willing to put up as security. This is because these assets will be sold to cover the cost of the loan, which is known as your “exit strategy”.
Bridging loans for property development come with a set of terms that can be tailored to suit you. Including the length of the loan and how you will pay interest. Make sure to have all the information on your chosen bridging loan and what will be expected of you.
Bridging loans are versatile
Unlike other loans, there is one main factor to consider when applying for a bridging loan – the property you intend to secure the loan against. Thankfully, there is a wide range of eligible properties that can be used as security. Including flats, houses, commercial units, and even land.
This means that you have the option to secure a bridging loan against the property you are looking to buy, or against an existing property instead. This will allow you to carry out whichever development strategy you have in mind. Be it refurbishing and reselling neglected houses or letting out flats.
Funding property development, refurbishment, and renovation
Property development is quite a costly task. Generally requiring a reserve of funds to produce a quality result in a timely manner. Without the necessary capital, development can drag on over quite some time. Which can make what was once a sound investment more trouble than it was worth. A bridging loan would allow you to avoid this kind of scenario by quickly providing the money you need to complete your development project.
In addition to developing property, bridging loans can be an excellent assistant in renovating a rundown property that could be something great with a bit of care and effort. As with property development, renovating a forgotten, rundown property into something resembling a home can be very pricey.
Unfortunately, finding the funds to cover the costs of repair and refurbishment can be quite difficult. Typical high-street lenders do not typically lend money to these kinds of projects. However, bridging loan lenders are more than happy to provide the capital, with no special requirements.
Developing land without planning permission
It can be dismaying to see a neglected property or plot of land full of potential, but without planning permission. Properties like this are usually seen as much higher risk, which makes financing these projects difficult. Whereas mainstream lenders are normally unwilling to accept applications for these projects, bridging loan lenders will.
By taking out a bridging loan, you would be able to fund the purchase of the land or property. Then make the application for planning permission after. This will allow you to realise the potential of your chosen property, or sell it on if you would prefer.
Bridging loans and property auctions
Bridging loans can provide large sums of money very quickly. They can be a perfect solution for property developers looking to make purchases at an auction. Auction purchases are made over a very short space of time. Making many traditional methods of borrowing impractical, given the amount of information you need to hand over, and the time it takes to process an application.
Bridging loans for property development are quick and simple to apply for. Meaning the money reaches you as quickly as you need it. This can make property hunting at auctions a more feasible way to find those new additions for your portfolio. In addition to getting started on any refurbishments at a moment’s notice.