The bridging loan market in the UK is steadily growing. More and more people are considering this form of financing in order to secure an excellent deal for purchasing property in the UK. The reason why there is a growing market for bridging loans is that there is a significant demand for finance in the domain of property investment. Although some borrowers still opt for mortgages, bridging loans are different in the sense that they are more flexible.
A Competitive and Flexible Form of Financing
Usually, as the target audience for a specific product or service increases, so does the variety of products or services. The same goes for bridging finance. In other words, as this form of financing grows in popularity, lenders are more flexible in the loan terms they provide – in this way, they make the market competitive.
Professional property investors have been using bridging loans for years in order to turn around properties and act fast. Meanwhile, when applying for a mortgage, the time required to get approval is much more significant, not to mention that the criteria are more stringent.
That is not all, though; the cost of a mortgage is significantly higher, which could minimise the financial return of the investor. Meanwhile, a bridging loan enables an investor to act and move fast, to embrace a deal whenever it emerges and to make the most out of it. This is primarily why the average size of a bridging loan has also grown over the last couple of years.
A Developing Market Segment
Furthermore, there are more people now that resort to bridging loans to cover the costs of large, complex projects. This could also mean that more and more people think of this option as a good, reliable alternative. In addition to that, as figures indicate, the average monthly interest rate for this type of financing has decreased. This, of course, has to do with the size of the average loan increasing. Hence, as grim as the economic condition in the UK might appear at the time being, things seem to be looking up – at least in the bridging loan sector.
Investors who are considering this type of financing for their upcoming project should definitely use a bridging loan calculator. This is a handy tool. It gives a fair idea of the loan you might get, the additional costs associated with the loan, and other important information. In this way, one can make a sensible decision prior to applying for a loan. Due to the shortage of residential property in the UK, it makes sense that investors want to seize each opportunity and take advantage of it. And a bridging loan allows one to do so.
The Bottom Line
On that account, we are looking forward to observing the way in which the bridging loan sector is due to develop further in the years that follow. Most likely, it will keep growing as it has been in the last couple of years, providing numerous opportunities to enthusiast investors.
If you would like to know more about bridging loans please contact property finance partners – bridging loans & development finance. on 020 3393 9277 alternatively, use the form below to apply.
It is quite common for people to change from a residential mortgage to a buy to let one. In both cases, the rules are similar, but buy to let mortgages do come with some key differences that you have to take into account and fully understand.
First of all, it is worth mentioning that you will need your lender’s consent if you want to switch to a buy to let mortgage. If your lender doesn’t approve this, then you have the option to re-mortgage with a new lender.
Let’s take a look at the things you will have to do to change your mortgage, as well as at the things you will have to take into account before and after doing so.
What Is a Buy to Let Mortgage?
First, let’s start with the essentials – namely, what exactly is a buy to let mortgage and why would landlords choose this instead of a residential one?
Just as its naming implies, buy to let mortgages are specially designed for landlords or borrowers that wish to buy a property and then rent it out. Naturally, the rent that you are likely to charge on the property after you buy it will directly influence the amount the lender will offer you.
Moreover, buy to let loans usually come with a higher interest rate than usual, besides the also steeper arrangement and booking fees. You will have to take this information into account and make sure that you have realistic expectations and understand what a buy to let mortgage implies.
How to get a Buy to Let Mortgage?
Even though getting a buy to let mortgage may sound easy, we assure you that it is not. You shouldn’t rush such a decision. So, make sure that you take every possible aspect into consideration.
Obviously, it is strongly recommended that you consult a specialist (Property Finance Partners) if you are unsure about getting a buy to let mortgage or changing your current mortgage.
When it comes to this type of mortgage, keep in mind that you will most likely want to improve/maximise your rental income.
In this respect, if you simply change your residential mortgage, for example, with your current lender, they will show you their rates only. Doing so will limit you to one single lender – you will not have the option to browse mortgages and choose the best one for you.
In the following lines, we’ll showcase the two scenarios that might make you want to change your current mortgage to a buy to let one.
Buying a new property and changing your current home to a buy to let
Also referred to as a let to buy mortgage, the practice of moving into a new property and switching the mortgage of your old one to a buy to let is quite common. After all, it seems like the natural thing to do for most people.
Instead of selling their old home, they choose to rent it out and get some rental income out of it as well. Moreover, you can re-mortgage your current home in order to fund the purchase of the new property.
The rental income that comes with the buy to let mortgage of your old home can very well be used to support your new residential mortgage.
A buy to let mortgage is also preferred when you can’t seem to sell your current home for the price you think it’s worth. If you have overpaid for it, then you will most likely want to hold the property and wait until its value is high enough.
Moving into a rented property and changing your current home to a buy to let
It may be harder for you to change your mortgage to a buy to let if you go with this option. While there are various available lenders for this practice, not every one of them will be confident enough and will consider changing your mortgage.
The main reason for their lack of confidence is that the buy to let mortgages are usually given to current homeowners that have at least one residential mortgage. Obviously, the lenders also have to take into account the various risks.
For example, if the tenants of your now-buy-to-let property default on paying the rent, you will be put in a difficult financial situation. Moreover, even the rent of the property you move into may be higher than a mortgage repayment. In short, if something goes wrong, the whole scheme collapses.
Lenders understand these risks and are likely to decline this type of switch.
How Much Can I Borrow on a Buy to Let Mortgage?
The amount you can borrow on a let to buy mortgage depends on several factors that have to be carefully taken into account. However, the biggest influence comes from the amount of rental income that you expect to receive.
Usually, lenders need this income to be around 25 to 30% higher than your mortgage payment. Naturally, you will also have to take into account the value of your current property, the existing mortgage balance, as well as your income, in some cases.
Naturally, we recommend you consult with specialists or talk with local letting agents in order to find out exactly how much you could borrow on a buy to let mortgage. If you wish to change your mortgage, it is important that you have taken every risk and factor into account before applying for a loan or a new mortgage.
Concluding Remarks
Long story short, you have to be careful and explore your options before considering changing your mortgage to buy to let. While it may seem like the right thing to do for you, you will have to make sure that the new mortgage setup does not put you in a difficult financial situation.
Also, keep in mind that some lenders are not so keen when it comes to changing your current mortgage – especially if the risk they are supposed to take is high!
For more information on buy to let mortgages contact property finance partners. Call020 3393 9277 or email[email protected]
Leading pan European property finance company, Property Finance Partners, offers solutions to getting the lowest bridging Loans in the market in a new post
Property Finance Partners has again reiterated its goal of providing innovative finance solutions for the property sector.
In its recent post where clients are educated on bridging loans and getting some of the lowest bridging Loans in the market.
Starting with as low as 0.43%. Property Finance Partners already made a name in the property finance industry as the go-to solutions provider for top-notch property finance solutions.
Bridging finance has become increasingly popular in recent times, more people realizing its immense benefits.
While bridging loan remains an amazing opportunity to the bridge gap between the cash flow needs and the actual situation, many people are yet to leverage its features.
This is where Property Finance Partners are looking to change the narrative by allowing even more people to enjoy the benefits of bridging finance.
In the article titled “Bridging Loan & Short term loans” –
https://www.propertyfinancepartners.com/bridging-loans/, Property Finance Partners give a short and concise description of bridging loan, providing a comprehensive guide on bridging loans.
The post also talks about the advantages of bridging loan. One of the biggest ones being the speed that the lender can obtain the finance.
In certain cases, a deal can be structured within hours if the right information is provided.
This consequently helps people in securing land considering the importance of speed and efficiency to the process.
Other areas covered in the post include Rates of Interest on Bridge Loans and the factors that determine the rates.
Property Finance Partners also talks about the different uses of bridging loans and how borrowers can take advantage of it in different situations.
In addition to Bridging Loan & Short term loans. Property Finance Partners offer other amazing property finance solutions.
This has made them one of the most sought-after results-orientated structured property finance companies in Europe with over 100 years of experience in the industry.
Services offered by the company include Senior Lending, J.V. Partnership, Stretch Senior Finance, Business Loans, and Development Finance.
More information about Property Finance Partners and the Bridging Loan services offered.
Can be found on their website. A video on Bridging Loans and the low rates offered by Property Finance Partners is also available on YouTube.
About Property Finance Partners
Property Finance Partners is a pan European results-orientated structured property finance company. They provide comprehensive real estate raising finance solutions.
For developers, experienced builders, institutional and corporate property owners, real estate investors, and landlords.
The company provides top-notch property finance solutions thanks to its professional team. Which blends in-depth local knowledge and finance industry driven insights as well as global expertise and experience.
Buying, renovating, and then refinancing a property is one of the strategies that property developers generally use nowadays to profit from real estate.
However, this is also a strategy that relies greatly on your ability to think and act fast.
Unless you have unlimited funds to buy and refurbish a property yourself, the chances are high that you will have to find alternative property financing options.
You could get sponsors – but that is easier said than done. Most of the time, you are better off by taking matters into your own hands.
For those who are in the business of real estate development, bridge loans have proven to be quite a good solution.
The demand for them has increased by 39.8% over the past year, and the global interest seems to be growing.
Typically, these loans are used on the short term for financing the purchase of a property before another one is sold.
If you are wondering why a bridge loan is a great choice for your finance, here are a few advantages that come with them:
They are very quick and convenient
When you are into the business of real estate development, you may often be found in need of quick financing for new development.
With this kind of loan, you should be able to raise the capital that you need to buy a new property – particularly if you have to do it fast.
The funds are generally given much faster compared to other loans designed for property purchase (as in, mortgages). You can even get the option to raise all the needed capital through a bridge loan.
They allow you to purchase any kind of real estate property
No matter if you want to refurbish a residential property or a commercial one, a bridging loan will allow you to do so.
Real estate developers use it to buy and develop residential establishments, commercial buildings, retail shops, apartments – and even lands.
If you go for a secured bridging loan, you will secure it against a property that is already owned by you.
If you are the owner of at least one piece of property that does not have any loans secured against it, then you may easily get your hands on a bridging loan.
They are perfect for major property renovation
It takes quite a lot of money to renovate an entire house – a sum that you may not be able to get with an average personal or business loan.
Since most lenders will consider this to be a great risk, there is a chance that they will not give you the money that you seek.
This is why bridge loans can prove to be such a great alternative.
They can cover the renovation costs, and they can make an uninhabitable home look habitable again. At that point, you may refinance using a traditional loan.
They are perfect on the short term
Mortgages can last up to 25 or 30 years – which can be quite troublesome if you want to maintain your real estate business going.
However, a bridging loan is generally given on the short term – from two weeks to 12 months at most.
It is also possible to arrange for longer periods if you are not convinced that you can sell an old property within a year.
You may go for closed or open types of bridging loans – which means that whether you want to stick to fixed payments or flexible ones, the choice is up to you.
As long as you are able to pay back the money that you borrowed, you will be given the ideal solution.
You may want to collaborate with companies such as Property Finance Partners since they have experts that can give you some good free advice. You can find them here: https://www.propertyfinancepartners.com/bridging-loans/
There aren’t any penalties for early payment
How many times have you been penalised on other loans by simply paying off the loan early? With bridge loans, you can pay the loan in full the moment you have the money. Without having to wait until it reaches full term.
So, let’s say that you went for a 12-month loan – but by the 6th month, you have already gathered the funds to pay the rest of the loan in full.
Other loans might penalise you for it – but bridge loans will allow you to pay the money without putting extra taxes on you.
Plus, considering that interest is gathered only while the loan remains, early payment will also save you on the interest.
Bridge loans are a great opportunity to get financing when you are into real estate development. They are fast, they are convenient – and they don’t put as much pressure on you as other loans do. Just be certain that you work with the right lenders during this process.
Development finance began to show a fair amount of potential as of late. Buying a property at a fairly low initial price and then developing it to be sold or lent at a higher price seems like a good investment for many people. It brings enough profit so that in the long run, you can recover the money you have invested in the initial purchase.
But still, do you understand exactly how this type of finance works? You may know a thing or two – but understanding the basics will make the difference between starting a successful business – and one that will leave you bankrupt.
What Does Development Finance Offer?
There are several types of finance options for development, each one targeting a certain kind of development. A smaller development, for instance, may involve a simple aesthetic renovation that has nothing to do with the structure of a property. This can be anything from a wall painting to a change in staircase rails, door knobs, and other similar items.
A lender, however, may also go for redevelopment finance – which is basically classic development finance that also handles the structure of a property. Those who want to apply for residential development are generally the ones who also need to dive into heavy work to the house structure.
In other words, if you are planning to extend the house or to rearrange the walls, you will have to apply for redevelopment finance. While this may be rather costly, it can also drastically increase the value of a property. On the long term, this may bring you a fair amount of profit.
Last but not least, property development finance will allow you to develop a building from scratch. Say that you have a piece of land, but you have nothing worthwhile on it. If you build an establishment there, then you’d be able to gain more profit by bringing in more tenants. In the long run, this will definitely prove to be a good investment.
However, bear in mind that a new project that is built from scratch can be quite costly – particularly if you don’t really know what to invest your money in.
It is recommended that you first contact a broker and ask for their advice before signing any contracts. In the long run, this might just save you pounds that reach the thousands.
Stratford Development Before
Stratford Development After
How to Apply for Property Finance
While development finance may seem like a classical loan for a mortgage, it is not exactly so. On mortgages, for example, you pay your part every month – and as long as you are on time with your payments, no one really cares what you do with your home and who stays in it.
However, property development finance involves business loans. The lender will assess the value of the property – and then will make you an offer for a loan based on your eligibility, ability to pay, and potential for the development to be a success. When providing finance, lenders will try to predict the final value of the project – and how much the developer will have to pay in order to get to that stage.
To apply for finance, you will have to turn in an application that specifically says how much property you have – including its development costs, building timescale, and professional fees. Once the papers have been turned in, the lender will give you a list of terms that you will have to agree to. Once this stage has been cleared and you have reached a mutual consensus, you’ll be ready to advance to the credit check.
Bear in mind that depending on the state of your credit, you may receive different financing amounts – if any. If you have a bad credit rating, there’s a high chance that your application will be rejected. Bad credit can have a serious effect, so make sure that you have checked it beforehand – and that you fixed any potential errors that you might have on your report.
Last but not least, the loan may have been approved – but the lender will still be monitoring the borrower throughout the entire process. Furthermore, since the interest rate is determined based on the “risk factor,” it’s hard to say from the very beginning how much you will have to pay in interest fees.
When it comes to property development finance, the paperwork is a very important step that you need to take care of. Plus, you need to consider that the future value of this property is also taken into consideration – which is why you’ll have more paperwork to deal with than with the average mortgage.
Before talking with the lender, as a developer, you have to ensure that you have the following documentation at hand:
Evidence of the property’s value (if owned) or its purchase price (if not yet owned)
The predicted property value once development is over, along with evidence
Renovation and business costs
Time schedule for the development
A CV or portfolio that proves your experience and ability to finalize the project
Details of the personnel and individuals that are involved in the project
Data on the building regulations
Plan permissions (copy)
Copies of planning restriction that you may come across
Depending on the paperwork, the lender will decide whether the property is worthy of development finance or not. If you manage to prove that the property will have significant value by the end, then you will most likely receive the necessary financing.
The Need for a Broker
When it comes to development financing, you don’t really need a broker – but still, it might not be a bad idea that you use one. When you are dealing with a lender, you might receive property development financing that is either too big or too small.
However, a broker will analyze your financing – and practically everything else – to ensure the lender acts in your best interest. This way, you won’t have the “nice” surprise of receiving an interest rate that is higher than your normal rates.
Plus, lenders have the tendency of sometimes hiding some things, or simply conveniently “forget” to mention them. A broker, however, will not only look for the best lender you can go for – but they will also provide you clarity regarding the costs of the loan.
They will basically explain to you what money goes where and why a certain fee is as high (or low) as it is. Brokers will also negotiate on your behalf so that you can get the best price – since they know the market and what to expect. Therefore, your finances will rise and you won’t have to overpay when it comes to fees. In the long run, this will prove to be a great investment.
So, as you can see, strictly speaking, a broker is not necessarily someone you’ll need when it comes to development finance. It is, however, someone who could help you get much better rates than you could by yourself.
Property Development Finance FAQ
When it comes to financing for development, there will always be questions. Some have clear answers – others will depend on several different factors. Here are some common questions that might arise in this domain, along with their respective answers:
Q: What are the fees that I will be expected to pay?
A: Development finance associates itself with a fair assortment of fees, mostly depending on the lender and the documentation you bring to the table. Before signing any contracts, it’s always a good idea to sort them out so that you know exactly what to expect. In these cases, it’s always a good idea to consult with a broker, since they will give you a fairly clear picture.
Q: How much will I be able to borrow?
A: This will depend mostly on the expected development value associated with your project. If you have a smaller project, then you will be given enough finance to cover the costs. However, if the project is bigger, you may receive more financing – provided you meet your lender’s criteria.
Q: Can I get financing if I don’t have any experience in property development?
A: This will generally depend on the lender. Some of them have no problems with offering finance to someone with no previous experience. The only condition is to either conduct proper research or to have a team of professionals working with you.
However, most lenders prefer thYou can find the top 10 tips for raising Development Financeat you have a certain degree of experience. This way, you will be seen less as a risk factor and more as an investment. For this reason, you might want to conduct proper research before settling on a lender.
Final Thoughts
Property development finance may seem like something difficult to understand and receive – but as long as you learn the basics, you’ll find out that it’s not actually that difficult.
Lenders will look for promising investments that will get good rental income when the project is done. The more solid your plan is, the more finance options you will receive. Provided both parties (lender and borrower) make their terms clear, there should be no problems when you are applying for financing.
It’s back, the house prices in the UK rose at a rapid pace last month outperforming previous months in 2017. It has regained the loss after suffering through the announcement of Brexit.
According to Halifax, the prices in July have increased by 0.7 per cent after a decline of 0.9% in June; this totals the largest jump in house pricing since December 2016.
Russel Galley, the managing director of Halifax, has stated “Recent figures for mortgage approvals suggest some buoyancy may be returning,” He stated this could be because of the unemployment rate falling to its lowest for over 40 years and the growth of employment. Russel also cautioned that wage growth is weak, which is challenging for buyers.
Some experts are warning caution though, stating that supply of property is still crucially small and although that helped in boosting the house prices it is not a healthy proposition in the short term future.
After a few months of uncertainty after Brexit and the government elections, there are signs of life in the housing market, but this surge is due to shortage rather than organic growth.
The next few months are surely something to keep an eye on to see the behaviour of the market and how that will affect development finance.
Since the announcement of Brexit, people have been predicting how the housing market will react over the coming months.
It seems that even until today it is way too early to predict the actual outcome of the real estate market and development in the UK.
According to the building society Nationwide the house market in July went up by 0.3% and a new peak established for a cost of a home at £211,671 in the UK, that being said the annual growth figure has dropped from 3.2% to 2.9%. The lack of housing and the demand is still keeping the house market stable, although we predict that there will not be any significant growth in the market during 2017, we expect it to stay sideways.
This resilience has surprised some economic analysts as transactions have been falling and are now at their lowest level for eight months and the number of approved mortgages are at their lowest for nine months.
So what is providing this support of the housing market, the simple answer is the shortage of housing on the market and demand is still vivacious as ever.
Nationwide’s chief economist Robert Gardner points to a survey, which shows the number of homes on the market has slowed down and the number of “properties on the agent’s books is at a 30 year low”.
With the consumer’s budgets are under pressure the prediction is a slow growth of just 2% for the rest of 2017.
With the big property development companies still boasting of new future developments, it is unlikely this sector will slow down in the coming years.
The smaller development companies are still borrowing development finances are still in demand especially in and around London.
If Brexit is to have a significant impact it is not showing yet; maybe it will in a few years time.
