London bridging finance;
Short term finance still a real option for London landlords
For those looking to buy and then develop property for rental or sale, bridging finance has really come of age in recent years as we have seen the London property landscape evolve. So how and why would you use bridging finance for a London property purchase?
Central or outer London?
With prices in central London out of reach of most people, and stamp duty increases impacting sales of prime property, we’ve seen new opportunities open up for property professionals in the outer London boroughs such as Lewisham, Wandsworth, Camden and Southwark.
This exodus of buyers and renters from central London is reflected in house price growth projections, with outer London being now far more popular with families and commuters. We’ll also see the commuting dynamic change, and in turn the conurbations they live in, as a result of the major
Growth of the commuter belt
We’ll also see the commuting dynamic change, and in turn the conurbations they live in, as a result of the major Crossrail projects, which will effectively allow people to buy or rent in more locations in and around London, but still have short travel times.
Opportunities for landlords and developers
This opens up some real opportunities for property developers and landlords. There are still plenty or properties to buy at reasonable prices, particularly if some renovation work is needed to get the property up to rental or sale standards. Or, the property needs converting from say a retail unit with accommodation above, into several residential flats.
When looking to get finance for renovation or conversion, the High Street banks may not want to lend on such property where planning permission isn’t yet granted or the house doesn’t have a functioning bathroom or kitchen. However, bridging finance lenders can take a more pragmatic view and look at the property’s potential as well as what security is being put forward.
Bridging finance – London opportunities
This is where bridging finance can come in to its own. It’s ideal for buying property at below market value or where a vendor needs to sell quickly. This can include buying finance company repossessions to property in probate, or buying off someone who just needs to offload a property that they don’t want to spend time renovating themselves. And with more relaxed planning requirements, it’s now quicker and easier than ever to maximise a property’s yield potential.
Auction finance in London
Another popular way of buying such property is at auction. Here is where landlords can find competitively priced property of all types, depending on what class of property they want to invest in. But with auctions requiring funds for the property in as little as 28 days, normal routes to finance are often not viable. That’s where bridging finance can be an option. Many specialist lenders can provide funds well within the deadline.
Typical product criteria;
- 75% Loan To Value
- 3 to 24 month terms – depending on the client’s requirement
- Suitable security – even a property deemed unmortgageable might still be suitable.
- For an experienced professional buying at auction a valuation may not be necessary meaning that an offer can be ready prior to the auction date allowing confident bidding in every case.
Repaying the bridging finance for your London properties.
The borrower also needs to show they can pay all of the balance off at the end of the term, this is called the exit strategy. However, during the term of the bridging loan, the borrower can plan to refinance on to longer-term finance, such as a buy to let mortgage, or they may plan to renovate the property and sell it straightaway to realise a profit (known as flipping).
With house prices due to continue to perform well there will be a growing need for bridging finance to supplement traditional routes to funding. Even with Mayor Sadiq Khan pledging more affordable new build homes, this will take many years to come to fruition and leaves big opportunities for landlords to buy wisely and rent at good yields.