Are you wondering how property development finance work? If so, we have all the information that you need right here. It’s very common for people to take out bridge or bridging loans when they need cash to renovate or refurbish a property so they can sell it on for a big profit later. These loans ‘bridge the gap’ between waiting for money and receiving it so property development can go ahead. Taking out a property development bridge loan can be ideal when you want to get a property development project underway quickly.
Read on to find out more about how property development bridge loans cost, what the benefits are and whether you’re likely to be eligible for one. Find out more about fees
What exactly is a property development bridging loan?
A property development bridging loan is a loan that you take out on a short-term basis to refurbish or renovate a property. These loans have big advantages over many other forms of lending because they are very quick to access. They are also noted for their convenient flexibility.
Does a property development bridging loan need to be secured against anything?
Yes. You will normally need to secure the loan against the value of the property that you’re working on. You can repay the loan once the work is complete and you’ve been able to sell off the property for a profit. If you’re not selling your property, you may be able to refinance it with a mortgage to pay back your bridge loan.
How do I pay interest on a property development bridge loan?
Interest may be calculated monthly, but you’ll normally only pay it once the agreement comes to an end. If you can pay off the loan early, this can be highly beneficial as you’ll only pay interest for the time you were actually using the loan.
How property development bridging loans help you take advantage of opportunities
A great thing about property development finance is that they enable you to act fast when there’s a property you’re interested in so you don’t miss out on it. These loans essentially enable you to act as a cash buyer. If you don’t have the funds available, there’s a big chance you could miss out on an exciting opportunity. A bridge loan can help you avoid this and gives you access to funds much faster than a traditional loan.
How much will I pay for a property development bridge loan?
The amount that you’ll pay to take out a property development bridging loan can depend on several factors. These include how much you are borrowing. Although you may need to borrow a sizable amount of money to get your project off the ground, the profit that you make can greatly eclipse the amount you pay in interest.
Interest rates on these loans tend to be between 5 and 9%. You may have the opportunity to pay monthly if you wish. There are some other fees you’ll need to consider, and these include the fee to arrange the loan, valuation fees, legal fees and broker fees. How much these cost you will depend on the terms you’re agreeing to with the lender.
How much should I borrow with a property development bridge loan?
It can be beneficial to borrow slightly more than you think you might need due to the nature of property development. Many property development projects do go over budget, and can be delayed.
Who can help me find the right property development bridge loan?
If you are interested in taking out a property development bridging loan, you’ll need to consult a broker. Bridge loan lenders don’t normally deal with the public directly, instead choosing to negotiate with brokers who can help you get the best rates, terms and conditions.
Working with a broker comes with many benefits. Experienced brokers like Bridge Loan Direct have years of experience to draw upon and fantastic contacts, which they can use to get the ideal solution for your specific circumstances. The best brokers offer a bespoke service that’s fine-tuned towards your unique requirements.
How much will I be able to borrow?
The amount you’ll be able to borrow will also depend on a range of factors. It’s possible to take out property development bridge loans for anything between £100,000 and tens of millions.
When deciding how much to lend to you, the amount of equity in your property, your loa-to-value or LTV ratio and the value of the property will all be taken into account. Your credit rating may also be considered, although this isn’t as important as it is with other forms of borrowing as the loan will be secured.
Which types of properties are property development bridge loans used for?
These loans are used to develop a wide range of properties including residential property finance like HMOs and buy-to-lets. They can also be used to renovate commercial properties including retail units, office buildings and warehouses. Some investors use them for mixed-use properties that have a blend of commercial and residential units.
You may also be able to use this finance for an unmortgageable property that requires a lot of work. You may then be able to get a traditional mortgage on the property once you have made improvements to it.
Can I use a property development bridge loan for land?
Yes. You can use this kind of loan to buy land. This can include land that is scheduled to be developed and undeveloped land. You could use the funds to build on the site or make improvements to an existing building on it.
Now you know more about ‘property development bridging loans – how they work’, you may be wondering who can assist you when you want to take out this kind of finance. At Bridge Loan Direct, we have a great deal of experience when it comes to helping people raise property development finance. We work closely with a panel of more than 300 lenders and do everything in our power to get you the best rates, terms and conditions possible.
We can remove much of the stress and strain from getting property development bridging finance and can cut the cost of taking out these loans substantially. Why wait any longer to get in touch if you are ready to find out more about property development finance?
