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Revealed: five benefits for property investors of using a bridging loan

13 July 2020 | Investment

Revealed: five benefits for property investors of using a bridging loan

There’s no denying that Covid-19 has caused huge disruption to the global economy, and, unfortunately, it has hit UK entrepreneurs hard, too – including property investors.   

With this in mind, bridging loan experts ABC Finance have created the first free bridging loan comparison tool for those who need help funding their property investments in the current climate.  

ABC Finance says that, unlike other bridging loan services, it doesn’t require a call back to provide figures. Best of all, the firm adds, it takes just four minutes to fill out – saving property investors both time and money in what is currently a stressful time.  

What are the advantages of using a bridging loan as a property investor?

Often, securing finance can be a huge barrier to landlords or property investor – and even more so in this economic climate. 

To help investors out, ABC Finance has outlined ‘some of the many benefits’ of using a bridging loan for property-related problems:  

1. Allows you to purchase a property before your current home has sold 

  • Bridging loans are the perfect solution for those who need to borrow the funds to complete a property purchase before the equity is released from their current home.

  • As they are based on property and one will, therefore, be sold to repay the loan – there is no complex criteria to fill out when applying for a bridging loan – allowing for fast completion.

  • This makes them perfect for purchased repossessed or other time-sensitive transactions. 

2. Funding the refurbishment of a property to increase the sale price, before selling it 

  • They can be used to raise funds against the property to fund a full refurbishment, with the loan being repaid once you sell the property for a profit. 

  • They’re super-efficient as interest can be rolled-up, meaning that there are no monthly payments to make during the loan term.

  • Instead, it’s all paid back at the end once the property sells. 

3. Ability to grow a property market portfolio faster 

  • If you want to buy a property in poor condition for cheap and refurbish it, a bridging loan is an effective way of doing this. 

  • Once the refurbishment is complete, the loan can then be refinanced to a mortgage and let, with the owner benefitting from higher rental value and higher property value. 

  • When refinancing, the bridging loan borrower will also be able to borrow based on the higher value and rent figure – meaning they may be able to get all or some of their deposit back to go onto the next property. 

  • This makes growing a portfolio much faster and easier to do, as you can recycle the same deposit each time.    

4. Potentially borrow 100% of the purchase price for below-market properties 

  • When buying a below-market value property, you can sometimes borrow 100% of the purchase price. However, deals like this are usually hard to find.

  • ABC Finance’s bridging loan tool, though, allows you to find the best deal, with the highest loan amount instantly.  

  • You may even be able to borrow against the value of the property instead of the purchase price, meaning you can put little to no deposit down on a purchase.

  • This also makes it quicker for you build a portfolio.

5. Enables you to buy property at auction within the allotted time-period 

  • Property auction purchases must be completed within 28 days, which isn’t always possible if you’re relying on a mortgage. 

  • However, the average bridging loan takes 3-7 days so you can complete your purchases in a timelier manner. 

Gary Hemming, commercial lending director of ABC Finance, said: “With the market moving very quickly at the moment, there’s never been a better time to pick up a property bargain. A lot of investors are preparing to invest heavily in the short-term and bridging loans are a great tool to help them stretch the funds that they have available to help maximise their profits.” 

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This post has originally been featured in Property Investor Today.