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Homeowners turn to mortgage alternatives

Posted: September 26, 2018

Research by Market Financial Solution found that 48% of homeworkers did not purchase their home with a mortgage.

Some used cash, but many used alternative finance solutions including mezzanine finance, crowdfunding, and bridging loans. Bridging finance was used by 13% of all homebuyers.

These figures are based on a survey of 2000 homeowners who bought property within the last ten years. About a quarter of them owned two or more houses.

About 37% of the people who responded to the survey used a broker to find funding options. Around 46% said that they did not have enough knowledge to confidently choose alternative loans. This is why brokers and financial adviser have an opportunity to explain to borrowers about all their finance options.

Bridging finance is traditionally used to bridge the gap between selling an existing house and purchasing a new one, especially if the sale process is going slowly. The 13% of homebuyers who use bridging loans show that many house purchases do not need bridging finance. For a minority of homebuyers, bridging finance can be useful to prevent a property purchase failing. They are also useful to purchase the property at auctions where the full price of the property has to be paid within 28 days or less.

Bridging loans have become a mainstream form of lending for property investors who use them to finance refurbishments that add value to the property. They often sell the property at a profit soon after the refurbishment work has been completed.