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Companies using bridging finance because of mortgage delays

Posted: May 30, 2018

Many buy to let landlords have formed limited companies to purchase property to save tax. Some are using bridging finance as they are finding it takes a long time to secure commercial mortgages.

The commercial mortgage application process for newly formed limited companies can take several weeks for lenders to assess the financial viability of

the companies and judge whether they can afford to repay the loan. A bridging loan can be used by landlords to purchase property quickly then repaid after the commercial mortgage application process has completed.

Forming limited companies to own properties is not a strategy that suits everyone. There are companies set up fees, and running a limited company requires extra administration work. For landlords owning less than four properties, it may not be financially worthwhile. Landlords considering forming a company should seek expert financial advice before making a decision.

There is a limited range of commercial mortgages available for companies purchasing residential property. A bridging finance broker will be able to secure a suitable loan deal

If the property the limited company is buying is empty and not producing an income, lenders may be reluctant to provide a mortgage. A bridging loan can be used to purchase the accommodation. After tenants have moved in and income is being generated, lenders will be more likely to approve a loan.

Bridging loans can also help finance property development work such as converting commercial property for residential use or upgrading the energy efficiency of property.