Bridging finance can be used to make a property habitable and saleable
There are many properties for sale that can be purchased for a bargain price. Since it is more difficult for buyers to obtain mortgages than it was four or more years ago, for people who can obtain mortgages, or have access to funds, it is very much a buyer’s market.
This is particularly the case for property that is in a poor state of repair, needs refurbishing or for new properties that need to be built or finished. There are many properties that are just waiting to be built or finished because the current owners are unable to fund to work themselves or are unwilling to.
Buying property that is in need of completion or restoration can be a great way to make a profit. This is because although many people can see the potential to make a profit on this sort of development, few are able to raise the funds required in order to do so. Properties that are not in an already habitable condition do not provide the required security for many lenders. This makes getting a mortgage even more difficult and quite often impossible.
Alternative ways to raise finance secured on this type of property would be bridging finance. The advantage that bridging finance has to offer is that these lenders are more flexible about the type of security that they will accept in order to secure their loans on. Of course bridging loans are only a short term facility, but for projects like these they are an invaluable way of raising the capital required to purchase the property and to complete the building work required.
Once the work has been completed the property should then be in a suitable condition that it is now acceptable security for a high street mortgage provider. This would mean that the property is now an achievable purchase for anyone who meets the criteria of the main mortgage providers, whom, not so long ago would not have been interested in providing mortgage facilities secured against this property.
Alternatively the developer may decide to repay his bridging loan by remortgaging the property himself with a buy to let or commercial mortgage. This would enable him to repay the bridging loan and make the property available for renting. Again buy to let or commercial mortgages would not have been an option when the property was purchased, due to its condition.
The flexibility of bridging finance makes this sort of project possible, but for larger new build projects then development finance maybe a better option.