Property developers and investors usually use it to purchase or renovate a property, but you can use it for almost any legal purpose. It is a secured loan, so you must have collateral, mostly a property, to take out a loan. With the increasing popularity of bridging finance, the number of bridging lenders is also increased. Now, many p2p lending platforms also offer bridge loans to facilitate their users. If you are considering taking out such a loan or have already taken it, it is essential for you to remain up to date about the bridging industry.
Here in this article, we will describe the latest news and trends related to bridging loans. So keep on reading to know more about these loans.
New Products
With the increasing demand, bridging lenders have introduced a number of new products to match the needs of borrowers. They also offer loans that offer a dual application for both a long-term mortgage and bridging finance. Landlords are able to arrange bridging loans that cover up to 85% of the property purchase price, giving them more time to renovate or refurbish a property and find tenants. This way, bridging finance can eliminate the risk of landlords purchasing a property at auction and use bridging finance as a short-term funding solution. Most properties purchased at auctions usually need decor and renovation to make them able to secure a traditional mortgage.
As the same provider underwrites both loans, the changeover and timescale are approved in advance and also give borrowers peace of mind that they will not be paying a high-interest rate over the long term.
Most bridging lenders offer interest rates on such products, including a two-year fixed-rate mortgage at 6.99% and a variable-rate mortgage at 6%. Some products do not have any early repayment charges, but interest may be charged on a daily basis. We can say that bridging products offer more security along with good value compared to regular buy-to-let mortgages.
Bridging loan companies are always trying to offer more benefits to borrowers. Some lenders have reduced interest rates and increased LTV ( loan to value) lending criteria, and others offer flexible lending terms and tailor-made bridging loans. If you choose the right lender or a reputable p2p lending platform, you can get maximum benefits from bridging finance products.
Use Of Bridging Loan To Buy Property At Auction
The most common use of bridging loans is when people purchase properties at auction. Although there are other equally valid reasons to use bridging finance, such as purchasing a property before the sale of existing property has been completed, auctions require quick funding, so most buyers use bridging loans for such purposes.
It is sad that in the last few months, the number of repossessions coming onto the market has increased. Most of these properties are put on auction by mortgage lenders. At the same time, investors who have cash available for initial deposits and fees can take advantage and purchase properties below their market value.
Financing a property purchase at auction can be challenging because mainstream or traditional lenders do not offer flexibility and take a long time to complete the approval process and release funds. The timeframe to make payments at an auction purchase is short, so mortgages or other traditional loans can not fit in this situation. You have to complete payment within 14 to 28 days.
A bridging loan gives buyers ease and quick funding that they can use to purchase and renovate the property so that they can apply for a long-term mortgage on this property.
Bridging Loan Trends
Here are a few bridging loan trends that you should watch out for in 2022:
Increase In Property refurbishment Demand
Property refurbishment has always been a popular way to increase property value. We have seen a big demand for refurbishment bridging loans in the last year. The pandemic has also changed the attitude of people about where they live. On the other hand, the increase in remote working also allows people to spend more time at home. So they are looking to refurbish their home. Refurbishment is growing from city centres and suburbs to rural locations.
Cash Flow A Key Issue For Businesses
We are seeing two common trends in businesses at the moment. Some are trying to reduce outgoings by reducing existing loans, while others are looking for cash injections to drive growth. In both cases, cash flow is the main issue for businesses. Many businesses are taking out bridging finance to overcome their cash flow issues.
Property Developers Requiring Extra Time
Supply chain issues and shortages of materials can cause delays in the completion of development projects. It means the capital of property developers is tied up for a long time and stops them from taking advantage of future opportunities. Developers can tackle this problem by taking more leverage at the outset.
Development exit bridging loan has proven an important tool for property developers this year and is going to increase as more developers start realising the benefits of taking leverage in a cost-effective way.
Bottom Line
It seems that the bridging loan providers and p2p lending platforms are weathering the economic storm by introducing new products and considering reducing interest rates and increasing loan-to-value. In addition, they can attract more customers by offering more products to facilitate property purchases at auction. The financial situation and property market trends are changing rapidy in the UK, so you must research before taking out a bridging loan.
