A Guide to Getting Property Development Finance

A Guide to Getting Property Development Finance
  • Opening Intro -

    If you are looking to renovate or develop property, then different financing options are available to suit your needs.

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In some cases, a typical mortgage may be suitable for your needs, however there are some situations where there are financial hurdles to being able to buy the property you want to renovate, or the land you want to develop on in this way.

For one thing, you may find it hard to get a mortgage for the value you need on a property in need of work before that work has been carried out. Equally, you may not have the funds available to develop on a site where you have an opportunity to buy. You may also be time constrained – a mortgage can take a long time to arrange and for the funds to become available, and this can mean that you may not have the finance available to take advantage of offers at auction or other fast, heavily discounted sales on land or property.

For these reasons, a lot of people look to bridging loans for property. Here, we look at what these are and how to get one:

What is a Property Finance Bridging Loan?

A bridging loan is a type of loan that can allow money for property purchase or development to be made available far faster than a mortgage, with a shorter term. It usually has a term in months rather than years, but like a mortgage, it places a charge on the property.

The purpose of the bridging loan is to allow you to buy and develop, and then repay when you have either arranged a mortgage or sold the property, if you are looking to quickly renovate and sell (or to flip the property quickly without development, for instance, in the case of a quick buy at auction for far less than the property’s value on the normal housing market).

Who Are These Loans Available To?

Property development finance lenders lend bridging loans to both businesses and individuals, and they can be taken out either for development purposes, or to overcome financial obstacles for people buying a house they intend to live in (for example when a chain is preventing them from making a quick buy on a house with a motivated seller).

For developers, the loans can typically range all the way up to millions of pounds of finance. With bridging loans for developers, however, the loan always places the first charge on the property (whereas in the case of owner occupiers, it can be the first or second charge from a legal perspective).

How Do You Get a Bridging Loan for a Property?

The first step is to talk to a finance company that specialises in this kind of lending. You will need to be able to show your plans and present evidence that you will be able to repay the short-term loan within the agreed term. Different lenders have different policies on who they will accept and the values of their loans, so shopping around can be important here.

Look into bridging loans and you may find that you are able to get the financial solution you have been looking for.

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