Bridging loans for buying at an auction sale
One of the most common uses of a bridging loan is for a client buying a property at an auction. This type of loan has many other uses for example securing a new property before the sale of the existing property has been completed.
Unfortunately over the last two years the number of house repossessions coming on the market via auctions has increased, these can offer a potential new buyer very good investment opportunities. A large number of these properties are put up for auction by the mortgage lender and can sell for less than the true market value.
A great many investors are finding it very difficult to fund these purchases from mainstream lenders, even more so in recent years. Mainstream lenders require surveys and approving any renovation plans the client may have. Purchasing at an auction normally means exchanging contracts on the day and completing within the next 28 days. A mainstream lender will normally take much longer than 28 days to release funds for the purchase.
Bridging loans are different as funds can be authorised very quickly giving the client breathing space especially if renovation work is required on the new purchase.
This type of funding also gives potential bidders at an auction the peace of mind the funding is in place to complete the transaction on time.
Please always remember a bridging finance lender will always want to see a firm repayment structure in place for any loan.
Bridge to Let.
Demand is a growing for bridging loans in the UK from buy to let investors, with a 25% increase in loans taken out since 2013 Bridging is being used more and more to fund property acquisition and refurbishment.
According to a recent survey, more and more buy to let investors are realising the benefits of bridging finance to acquire and refurbish properties. The availability of buy to let mortgages is improving but slowly, bridging provides fast, short term loans that are ideal for turning round properties quickly. Brokers have seen the buy to let demand for bridging loans leap this year and they believe this will continue in 2015.
Property prices are increasing across the UK, buy to let landlords are looking for below market value properties which will give them greater returns on their rental income. Landlords are using bridging loans to finance the development and refurbishment of properties which they may be unable to secure mortgages on.
Bridging finance has many uses and can a very quick and easy way out of a problem.
Please do not hesitate to contact us to discuss your needs and we will be happy to advise you of your best course of action.
Bridging Loan Applications on the Increase
The number of loan applications increased by nearly 19% in the quarter ending September 2014 compared to Q2 ending in June 2014.
There has been a large increase in the value of applications for bridging loans in 2014 compared to 2013.
Owner Occupier Bridging
The increase in the number of owner occupiers taking to bridging lenders for finance is reflected in the number of loans being taken out to refurbish properties. In February of this year 8% of brokers listed purchase & refurbishment as the most popular use for bridging. This figure has now risen to 15% and still on the rise.
Increasingly borrowers are seeking alternative finance when a conventional mortgage cannot be arranged and are taking loans against the value of existing properties.
When should you use bridging loans?
Bridging loans can be used for many reasons, such as property investment, buy-to-let and development of an existing property.
More recently, there has been a growing trend among borrowers to use bridging loans due to high street and private banks taking much longer to process applications for larger home loans.
Many borrowers now are also viewing bridging loans as a simple and effective alternative to mainstream lending.