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How To Utilise A Bridging Loan To Build Your Own Home From Scratch? Uncategorized

You might be thinking of building your own home from scratch, but it can be hard to do with no financial help. 

It is where a bridging loan for self-build can come in and help provide a financial solution, to help see the project all the way through, with no delays. 

The last thing you want is to get halfway through the self-build project, to find out you have no money left to finish it off.

How To Use A Bridging Loan For Building Your Own Home From Scratch?

There are various reasons to utilise a bridging loan as they are flexible, and the option is available to anyone who requires them.

One-way bridging loans get utilised is for building your own home, as it can provide financial support throughout the project, to help ensure it’s completed on time. 

Just like for any other reason, a bridging loan for self-build would require finding a lender and going through the application process, to then be approved for the loan and receive the money for the project.

When looking for lenders for a bridging loan for self-build, you may need to find some that specialise more in the self-build industry as they may be willing to lend more money towards the project. 

As always, be careful when choosing a lender and always compare them to see what the best rates are and to ensure none are overcharging you for their services, lenders are notorious for adding hidden charges.

Once you’ve found the right lender, you can go through the application process and discuss your needs with the lender. 

With the bridging loan for self-build, evidence of buying the property or land may be required, along with the plans you have for the self-build project. 

This way, the lender will have an estimated value of what the property will be worth, to help them decide how much they will lend. 

You can use the property as security for the loan and a potential exit strategy.

When you’ve completed the process, and discussed with the lender the plans, payment terms and been approved for the loan, then you will receive the money in about 7-10 working days. 

The money is now yours to use on the self-build project.

The bridging loan for self-build can be used for any related to the project, from buying furniture to paying for services such as a plumber. 

The loan is there to be used to help with the self-build project and prevent any delays or financial problems.

The Advantages and Disadvantages Of A Bridging Loan For Self-Build

There are always pros and cons when it comes to a bridging loan for self-build, so it’s essential to look at them and decide if a bridging loan is the best option or to consider using a different financial solution.

Advantages:

Quick and Easy To Arrange: Bridging loans are a quick process, that always you to get the money very quickly, with the terms of paying it back within a short-term. No matter how much you’re borrowing, you can access the funds in as little as 72 hours.

  • Repayment Terms-

Lenders allow you to repay sooner than agreed without a penalty, which means borrowing costs and interest rates are kept to a minimum. 

With most bridging loans, the money will be paid back on one payment date, which is agreed beforehand, so the payment terms are kept relatively simple.

  • Loans Are Available For Up To 100%-

Depending on the use of the bridging loan, some lenders will give up to 100% of the property or project value, as long as security is available. This can help with a bridging loan for self-build as you could get the full amount of the project, making it a lot easier to complete.

Disadvantages:

  • Interest Rates-

There are monthly interest rates when taking out a bridging loan, which over time can add up to be a lot of money.

If you can pay the loan back within a short amount of time, then this will help reduce the amount of interest paid on the loan.

  • Additional Fees-

Bridging loans will always have additional fees to pay, with some lenders charging more than others.

Some may offer some of these fees and services for free, so always compare different lenders, to make sure you’re not paying for something that you don’t need to.

  • Security In Equity-

Bridging loans are only given on the basis that there is a considerable value of equity to be used as security for the loan.

When it comes to bridging loans for self-build, it can be hard to provide the equity as you’re building a house to live in, not sell. 

However, your former home can be used as a security as this will get sold after the project. So the money from the sale of the property can be used to repay the loan.

Additional Things To Consider

As mentioned above, with bridging loans, there is monthly interest rates and additional fees to be paid on top of the loan. 

This is something to think about before getting the loan, to ensure you can pay back the bridging loan but also the monthly interest and fees on top of it.

Bridging loan calculators are available online to roughly work out how much interest will be paid on top of the loan.

Along with these additional costs, you also need to consider an exit strategy and security as this is required when it comes to applying for a bridging loan. 

As you’re building your own home, it is likely you still have your former home, and therefore that can be used as security and equity and also the exit strategy. 

It’s great to be able to keep that property whilst building your new one, as once the project is complete, it can be sold and the money from it can be used to pay the loan back.

A bridging loan is an excellent financial solution when it comes to building your own home, as it’s quick, simple, and money can be available within days. 

It’s best to have your former home still so it can be used as security and an exit strategy for the loan, so you then don’t need to worry as much about how to pay it back. 

You can use the funds from the loan for anything related to the self-build project, so it’s great to get you started and help complete the project, with little delays.

To find out more about bridging loans or any other property finance solution. Please contact Property Finance Partners on 020 3393 9277 or Email: [email protected]

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