November 25, 2022

Bridging loans for property development

Bridging loans

property can’t let down the people to buy new houses in the UK. According to Guardian, house buyers have swamped, reaching the first high in the past 35 years. 

No matter how promising the sector has become, property developers still struggle to find the best finance solutions. Losing all your money in the development of an uninhabitable property is the worst nightmare. 

That said, some excellent options like bridging loans or Peer to Peer lending UK exist. Using this short-term loan, you can buy, refurbish, and sell a property. 

Let’s see how it works for your following property development projects.

What is a bridging loan?

You might have come across various loan options if you are into the development sector. Chances are, you have used some of them for your previous projects. But do you find it hard to get a property loan? Then you should pay heed to this short-term loan.

It is a short-term loan you get for 12 months to buy a property until you arrange finance to repay the loan and meet your cash flows. 

It could be a convenient financial arrangement when you don’t have the funds to buy a property. However, you can expect a higher interest rate with these loans. 

As you can get the funds on short notice, it becomes a good option compared to mortgages. You can utilise these loans for your projects in many ways. Let’s discuss some of them. 

Uses of bridging loans for property development–A sneak peek:

While there are many use cases for these loans, we will give an overview of some of them.

Usual property loans:

These loans help you when you want to buy a property before selling an existing one. For example, suppose you read an advertisement for a property. Immediately, you make up your mind to finance it due to its better investment projects. 

However, you don’t have the money right now. So, to bridge the financial gap, you can go for bridging finance that would instantly provide you with the finance. Then, once your older property gets sold, you can repay the loan.

Refurbishment property loans:

It’s a lucrative business to renovate an uninhabitable house and sell it at a high value. Usually, worn-out and derelict houses have lesser market value. So, instead of purchasing furnished property, developers tend to buy them. 

However, the problem lies in getting the finance. High-street banks and financial institutions won’t provide mortgages for a property. Developers resort to getting bridging loan. In this way, they can easily purchase, refurbish, or sell the property. Moreover, they get the time to repay the loan.

Development loans:

You can even get a loan to build a property from scratch. It may include buying the plot, constructing the building and then furnishing it for sale or mortgage. But, of course, the best thing is that you get ample time to generate revenue after selling or refinancing the property. 

Benefits of property developers:

Real estate development is one of the most profitable businesses in the UK. Bridging loans can go hand in hand with your projects. Let’s see how they can help you.

Quickly available:

Timing is critical in every business. When it comes to property development, you must stay abreast of every new deal. It goes without saying that an early bird catches the straw. But, in the same breath, we can say that an early investor gets the deal. 

But, what drives the steadfast approach? First, you need the money to buy a new plot or a building. Similarly, you can win an auction with large sums on standby. 

Usually, developers don’t have the cash upfront. Likewise, they find it challenging to get loads of money on short notice. 

That’s where bridging finance comes into action. You can get this loan in as minimal as three days. Moreover, it can take 12 days maximum if you do the proper documentation.

Flexible:

The flexibility of these loans isn’t unheard of. That’s why they get the most attention in the real estate industry. Its 360-degree coverage provides as many finance solutions as there are types of projects. 

Why would anyone tread a lofty path to get a loan when she has this handy way to get different types of loans?

So, you can get this loan if you are working on commercial or residential property or want to buy a plot or refurbish an apartment.

On top of that, you can make your repayments with ease. Open loans allow you to get a loan without a defined exit strategy. In this way, it becomes a Godsent opportunity for builders and investors to get the loan on their terms.

How to get a property loan?

Unlike your common loan types, you can’t get this loan directly. On top of that, most banks don’t provide these services. So, you can’t go to a typical bank in your neighbourhood to get a deal. 

Nevertheless, you need to find a broker to discuss your preferences or visit a P2P lending platform. You can find one on the internet as it is teeming with many loan brokers. After discussing your range and specifications, you have to wait till you hear back from the broker.

They may find you a lender or bank willing to give you credit. You should have a property on which you secure the loan. Some individuals put their existing property as security while others secure the property they want to purchase. 

The most critical part of your deal is negotiation. Lenders don’t care about your credit score or history. Instead, they like to discuss how you will repay the money. You define whether you want to go for a closed or an open bridging loan. 

Once you get the payment, you must repay it as soon as possible to portray your positive image.

Final words:

Property finance has been marred with difficulties before bridging loan services. However, it has become a handy tool to kickstart your property development business. We have provided some insights in this article that are a must-read for you.