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Recent years have seen bridging finance emerge as a popular product for a wide range of investment purposes. Buy-to-let in particular has become a popular application for flexible bridging finance.
For new and established investors alike, the High Street has lost its appeal a long time ago; complicated and time-consuming application processes, elevated costs for borrowing money, unnecessarily strict eligibility checks, all making it difficult for investors to obtain the support they need particularly when fast-access finance is needed.
With bridging finance, most of these obstacles can be avoided entirely, but what is it about bridging finance that makes it particularly attractive for buy-to-let investors?
How Bridging Loans Work
The basics of bridging loans could not be simpler; the funds required are secured against qualifying assets, released to the borrower within a matter of days and repaid after six to 18 months. Interest is charged on a monthly basis – often lower than 0.5% – making prompt repayment the key to cost effectiveness.
Bridging finance is a uniquely accessible facility, where all applications are given fair consideration. Even with poor credit, a questionable financial track record or no proof of income, it is still possible to qualify.
Essential for buy-to-let investors, who often cannot provide the same financial documentation and evidence as a conventional employed applicant.
For buy-to-let investors able to qualify for bridging finance, the potential applications for the funds are limitless. However, the most common uses for bridging loans among BTL investors are as follows:
Expanding an Existing Portfolio
The same also applies to established investors who are looking to expand and build profitable portfolios. BTL properties with huge potential often change hands at rock-bottom prices if acted upon fast. For example a property hich is in a poor state of repair at auction.
Bridging finance means buy-to-let investors need not be reliant on the complex, costly and time-consuming mortgages available on the High Street. When time is a factor, there is nothing faster or more convenient for BTL investments than bridging finance.
Starting Up New Businesses
Buying into the buy-to-let sector for the first time means coming up with the capital, such as capital loans, needed to purchase a property. If you already own your home, a bridging loan could be an accessible and affordable option.
You can purchase a BTL property at short notice, get it in shape and let it out. In the interim until the loan term ends, you can focus on making the necessary arrangements to shift the loan to a longer term facility.
Covering Unexpected Bills
Running a buy-to-let business means facing the constant risk of unexpected bills at inopportune moments. An unexpected tax bill, covering the costs of an urgent repair, changes in policy requiring immediate property renovations, all perfectly plausible yet impossible to predict.
It is not uncommon for even established BTL landlords with extensive portfolio to have very limited on-hand capital. When most of your money is tied up in properties, bridging finance can offer a lifeline when needed most.
Pre-Sale Property Renovations
There may also come a time when a buy-to-let investor chooses to sell one or more of their properties. Prior to which, a bridging loan could be used to conduct essential repairs and renovations; all contributing to the market value of the property and boosting their profits.
House-flipping has the potential to be a profitable venture, but can also be difficult to fund. Most major banks are unwilling to lend money against properties in a poor state of repair. By contrast, bridging loan specialists will usually lend against almost any type of property in any condition.
Temporary Cash Flow Shortages
Temporary cash flow shortages are inevitable when running a buy-to-let business, primarily due to the fact that most investors’ money is almost always tied up in their properties.
On the High Street, fast-access funding needed in a pinch is not usually an option; with bridging loans, the funds needed can often be raised within a matter of days. All with the added convenience of prompt repayment to keep overall borrowing costs to the bare minimum.
If you would like to learn more about the benefits of bridging finance or have any questions on loans for BTL investors, call anytime for an obligation-free consultation with financial and analytics consulting agents.