The Advantages of Bridging Loans for Investors

By accessibleproperty

March 22, 2022

Over the past two years, the Covid-19 pandemic has brought about a huge disruption to the economy worldwide, with some sectors still unable to recover. Entrepreneurs in the UK, including property investors, are among those who have felt the biggest hit. 

What is a “bridging loan” meaning? And what benefits does a bridging loan provide a property investor? Usually, securing funding can be a huge barrier to property investors or landlords, especially in the current economic state. So, to help investors, ABC finance outlined a few of the many benefits that come with securing a bridging loan for property-related issues: 

Enables You to Buy a Property before the Current One has Sold

If you are one of the many who need to secure funding to complete a property purchase before equity is released for your current one, then a bridging loan can be the ideal solution. Given they are based on property and will, and thus, be sold to cover the loan, there’s no complicated process when it comes to applying for a bridging loan. This results in fast completion. 

This feature also makes bridging loans ideal for purchased repossessed and other time-sensitive transactions. 

Allows for the Growth of a Property Market Portfolio Faster

If you are looking to purchase a house in poor condition for low and refurbish it, a bridging loan can be the best solution. Once the refurbishment is done, you can then refinance the loan to a mortgage and let. At the end of the day, you will be able to benefit from both a higher rental and property value. 

During refinance, you will also be able to borrow based on the higher rent figure and property value. This means you may be able to get some or even all of your deposit back, to put onto the next property. Ultimately, this makes growing a portfolio easier and faster to do, as you get to recycle the same deposit. 

Enables You to Fund a Property Refurbishment to Increase the Value Before Selling

You can also use a bridging loan to secure funding for a complete refurbishment and pay back the loan once you sell the house for a profit. These loans prove to be extremely efficient as interest can be rolled up. This means you do not have to make monthly payments during the loan term and instead pay it all back once you sell the property. 

Potentially Borrow 100% of the Buying Price for Below-market Value Properties

When purchasing a below-market property, it is possible to borrow 100 percent of the purchase price. Bear in mind, however, that these types of deals are often hard to find. 

Allows You to Purchase at Auction
Property auction purchases need to be completed within 28 days and if you’re depending on a mortgage, this may be almost impossible. A bridging loan, however, takes 3-7 days to process, meaning you can complete the purchase in a timely fashion.