£100k – £30m
up to 75%
3 - 24 months
What are residential bridging loans?
A residential bridging loan is a form of alternative finance that allows you to raise capital fast, by utilising your current assets as security. This provides the ability to react fast to residential investment opportunities, and acquire valuable assets to increase your portfolios, to refurbish and sell, or to let.
Our residential bridging loans can also help property investors ‘bridge the gap’ of financial payments when purchasing and selling property in England and Wales. Often our clients are keen to add a new property to their portfolio, but risk losing out on an opportunity whilst waiting for long-term finance applications to be accepted, or for a previous property to sell. This is where a residential bridge loan could provide the solution. With a bridging loan, you can purchase the property you have in mind promptly, whilst making other arrangements for the long-term financing of the asset or waiting for the previous property to sell.
What is the difference between residential properties and buy-to-let investments?
Residential investments often relate to properties that are purchased by property investors or high-net worth clients looking to increase their property portfolio. They may then look to renovate or convert the building or hold the asset to try and achieve long-term capital gain. They can include buy-to-let properties that will be lived in.
Buy-to-let investments relate to assets bought with the intent to ‘let’ out the property to one person or family residing under one roof. It can also be used for Houses in Multiple Occupation, where a number of different tenants rent individual rooms.
Why do people need a residential bridging loan?
You can use a residential bridging loan to buy a property more quickly, or for a variety of other reasons, including:
- Purchasing property in need of refurbishment
- Buying a new property while awaiting the completion of a sale
- To release capital for other ventures – including commercial property purchases
- Extending a lease
Why do people need a buy-to-let bridging loan?
- Refinance existing property portfolios
- Start a property portfolio
- Purchase HMO properties
- Acquire new build properties
- Undertake light development with intent to let
- Purchase property with the intent to let
- To facilitate Freehold/Leasehold extension
What are the common advantages of buy-to-let assets?
1) Monthly income
By letting out their properties, landlords receive rental payments, typically on a monthly basis. Landlords also often factor in a profit to make the endeavour worthwhile. However, they also need to consider other costs to keep the property(s) in a rentable condition. These additional payments can include:
- Paying any existing debt on the residential property (e.g., ongoing mortgage payments)
- Landlords and building insurance
- Any bills managed by themselves instead of the tenants
- Repairing wear-and-tear damage
- Renovation or refurbishment projects (bathroom, kitchen etc)
2) Long term capital gain
Owning a BTL property for the medium to long-term can mean that the asset will potentially rise in value, and provide capital gains for the owner. This increase in value often follows the trajectory of average national house price increases, which are steadily rising across the country due to the demand for houses. If the landlord decides to sell the property, the market value of the house could be a lot higher than when it was first purchased.
What types of buy-to-let properties are there?
There are four key types of BTL properties that you can purchase on the UK property market. These styles are:
1) Studio Apartment
2) Flats / Apartments
If you are interested in investing in buy-to-let properties, before you purchase your property, it’s important to think about the tenants you wish to rent to. Each property often reflects the type of tenant that you wish to attract. Of course, other factors will come into play here – additional areas to consider are rental price, location and quality of the interior.
How can a residential bridge loan be used?
To counter delays caused by long-term lenders
Many borrowers use a bridging loan because they are fast. Traditional lending is a long process. In many cases, it can take up to 130 days – even for a seemingly simple application. With such a large amount of time spent waiting for funds, this delay can put the borrower’s residential purchase at risk of falling through, or open to gazumping tactics from other buyers.
To purchase new build investments
Buying new build properties is particularly popular with overseas clients. The period of exchanging and completing on a new build is generally set by the developer and is often around 2 weeks. This puts the borrower at risk of losing their deposit. A bridging loan is usually required when the buyer is not able to secure the funds by the set completion date.
To Buy a property at auction
Auctions can be a great place to look for good value properties, whether it be residential or commercial. Auctions are also popular for those looking to work on refurbishment projects, so that they can redecorate, refurbish then resell the property for a potential profit. Auction finance is designed to move quickly, as auction houses usually provide a tight completion window, averaging only 28 days.
To release funds for other ventures
If you, or a client of yours, is looking to expand their property portfolio, a bridging loan can be a short-term finance solution for purchasing commercial assets. Much like with residential properties, this is usually due to the speed in which funds can be deployed. The buyer can secure their bridging loan on a residential asset in order to release funds to purchase a commercial asset. There is however also the option to look at a commercial bridging loan, which can allow the investor to complete without the worry of the sale falling through, by securing the bridging loan against the commercial asset being purchased.