Property auctions in Scotland can give you a valuable opportunity to purchase property to let out or live in yourself. Scottish property auctions can also give you the chance to purchase below market value. However, one challenge that comes with buying property in Scotland is that you need to be quick and complete the transaction within a matter of weeks. If you don’t have the cash available, a bridging loan can be the solution you need. Read more about bridging loan eligibility in Scotland
What is Bridging Finance?
Bridging finance is a kind of short-term loan that you can use to “bridge” the gap between buying a property and securing longer-term funding. You might need to use a bridging loan if you’re waiting to sell another asset or get a mortgage on the property, for instance. Bridging loans are fast to arrange and are often used by investors, landlords and developers when they have their eye on a property and need to move quickly to avoid missing out.
Why Use Bridging Finance for Scottish Property Auctions?
In Scotland, auction purchases are legally binding. If your offer is successful, you’ll need to pay a deposit right away and settle the remainder within weeks. It can be very hard to get a traditional mortgage in such a short period of time, especially if the property needs a lot of work. Bridging finance can solve this problem by giving you access to funds within days and helping you purchase properties that wouldn’t otherwise qualify for a mortgage. Bridging loans are very popular with individual investors, limited companies and property developers.
How Can I Get a Bridge Loan for a Scottish Property?
If you do want to get a bridging loans in Scotland, you’ll need a clear and convincing plan. You’ll need to show that you have a good exit strategy for repaying the loan, which could be refinancing the property with a traditional mortgage or selling it once it’s been refurbished.
What Kinds of Property Qualify For Bridge Loans?
Bridging loans can be used to buy most kinds of properties, even if they’re uninhabitable. These can include residential properties, commercial properties, mixed-use properties and even land. Many Scottish auction properties need renovation or are sold with title or legal issues. This can put off traditional lenders, which is why bridge loans can be such a great solution.
How Much Can You Borrow?
Bridging loans normally allow you to borrow up to 75% loan-to-value (LTV), but this can vary depending on factors like the condition of the property or the exit strategy. If you’re able to offer extra security to the lender, you might be able to get bridging loans with 100% LTV. A bridge loan broker can provide short-term property finance and tailored solutions and explore the entire market to help you find the right solution, whether you’re an experienced investor or buying property at auction for the first time.
Key Benefits of Bridging Finance for Auction Purchases
- Loans can often be arranged within a week to help you meet tight completion deadlines.
- They’re also very flexible, so you can use them for a wide range of property types and conditions.
- In some cases, you can “roll up” the interest and pay it at the end of the agreement.
- Bridge loans also let you add value. You can buy, renovate then refinance at the end or sell the property on for a profit.
What To Consider If You’re Looking for a Bridging Loan
Bridge loans aren’t perfect for every situation. Before you take out a loan, you need to make sure you have a clear exit strategy such as selling or refinancing the property. You also need to factor in all the costs to make sure you can cover them. These costs can include interest, arrangement fees, legal fees and valuation charges.
Make sure you understand the terms that you’re agreeing to, such as the loan term, repayment structure and any penalties for late repayment. It’s also very wise to talk to a mortgage broker who can help you find the best lender and loan for your specific needs.
