Should You Get A Bridging Loan For Property Development?

It is challenging to look for a good financing company with fast, efficient funding and the best property development services. But it is also challenging to decide what type of financing best applies to your current needs. For example, if you want short-term, flexible loans with lower interest rates, you might want to try going for a bridging loan. However, are they a fit for you?

Here, we give you insights into whether bridging loans are your answer to financing property development.

Do you need a short-term loan to develop property?

If you do, bridging loans are your best bet. Bridging loans are short-term loans that can be used for any development project. It provides immediate funds, especially for people who need them on the spot.

However, bridging loans tend to ask for higher interest rates as short-term funding, but some lenders are negotiable. Just make sure that you can back up your argument for better results. If you need to take out a bridging loan for your development project, you can reach out to the experts at https://www.bridgingfinanceloans.co.uk/ for the best rates.

Is it okay for you to loan at a higher LTV ratio?

Bridging loans are offered with a loan-to-value (LTV) ratio between 70-75% of the total. This means that you should deposit 30-35%. While this rate is typical for residential homes, some lenders lower it to 50-60% to benefit themselves if you apply for commercial use. However, doing so will be risky as buyers may be unable to pay at the end of the deal.

Does a higher interest seem fair to you?

Bridging loans are short-term deals, so lenders usually ask for higher interest rates. Some ask for monthly payments or some in bulk at the end of the term. Of course, you can negotiate interest rates with your lenders, but you can convince your lender that you’re a low-risk borrower. You can also use help from a loan broker for better accessibility to deals that may not be open to everyone.

Perks of bridging loans

• You can buy a property quickly. Bridging loans ensure your property acquisition since they are short-term deals. Funds are usually given if you’re qualified.

• You can use it for the renovation of the property. The flexibility of bridging loans will allow financing for development if your house is already built and will only need renovation.

• Possible for buy-to-let buyers. Some lenders both handle bridging loans and buy-to-let mortgages, which is known as bridge-to-let.

• You can pay it off immediately. Since it is a short-term deal, you can finish paying it off in as early as one year.

Takeaway

If you’re agreeable to the conditions in a bridging loan, then it might be the most suitable way for you to finance the development of your property. If you want to know more about bridging loans, enquire with us.