How to use a bridging loan to convert a home to a holiday let
Bridging loans are flexible loans that have many uses. One recent example (reported by DevelopmentFinanceTodayc.o.uk this month) was a lender who wanted to purchase and convert a bungalow to a holiday let in the North Yorkshire seaside town of Saltburn-by-the-Sea.
The developer decided to use bridging finance. He needed a loan of £156,000 to cover both the house purchase and the conversion work, and this loan was split into two sections.
The first part of the loan, £126,000 was provided to purchase the bungalow. After the property purchase was completed, the rest of the loan of £30,000 was provided for the conversion work. The loan was provided in just seven days on the lender’s fast-track service, which meant that work could quickly be started on the conversion.
The bridging loan was for a six-month period and is to be repaid from a mortgage on the building from a building society.
The project was financially sound and not a high risk. After the conversion work was completed, the value of the bungalow was £325,000 and the rental income was £54,000 per annum. The bungalow was situated next to the beach and the business plan for the holiday letting was solid.
Borrowers who require a quick turnaround for bridging finance can use a bridging loan broker who can work with lenders to fast-track bridging loans. The borrower needs security, usually in the form of property, and a clear plan of how and when the loan will be repaid.