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Bridging loans appeal to professional property investors

Posted: April 14, 2017

According to an April 2017 PropertyInvestorToday.co.uk article, the bridging sector has had a fivefold increase in lending activity since 2011. This growth is partly fuelled by professional property investors using them to finance property deals.

Though there is general uncertainty about the British economy following the Brexit decision, this has not affected the bridging finance market, which has grown over the last few months.

Bridging loans were once seen as a last resort by property investors, but now are widely regarded as mainstream, and a fast and flexible route to funds. They can be used to complete property deals quickly, be they open bridging loans (with no fixed repayment date) or closed bridging loans (which do have a repayment date), and usually don’t come with exit fees for paying them off early. Interest rates on bridging loans are currently low, which also makes them attractive for investors.

House prices are rising, though at a slower rate than in 2016. Property investors need to buy property as soon as they can to avoid future price rises, and bridging loans can be arranged quickly to complete purchases.

Bridging loans are short-term and are ideal for renovations that have a completion deadline, or for property auctions where winning bidders will be required to complete their purchases within 28 days.

The loan application takes into account the exit strategy, which is when and how the loan will be repaid. The exit strategy could be based on reselling the property following renovations, or be dependent on refinancing to a long-term commercial mortgage.