Bridging loans for purchasing unmortgageable property

Bridging loans for purchasing unmortgageable property

Over recent years the idea of buying a derelict property cheaply, doing it up (with some stress and heartache on the way), before restoring it to its former glory and selling it on for a healthy profit, have been popularised. However, typically these properties are deemed “unmortgageable” because they are not immediately habitable.
Not only can turning an ugly duckling of a property in to a swan be financially rewarding, but many property developers find it a hugely satisfying way to generate income, and quickly become addicted to the process!
However, buying an “unmortgageable property” is not as straight forward as buying other types of property simply because of the fact it can’t be bought with a mortgage, so the buyer has to find another way to purchase the property.
Bridging loans however are a very popular option for buying property which is unmortgageable until it has been renovated. Once the property has been renovated and made habitable, the owner can then apply for a mortgage for the property.

  • Bridging loans are a convenient way to purchase an unmortgageable property because the lending criteria can take into consideration the buyers existing property value as well as the property which they are looking to buy.
  • The buyer can use the equity in an existing property to help meet the value of the bridging loan required to purchase their new “unmortgageable” property.
  • Bridging loans can be used to purchase 100% of the “unmortgageable” property. If additional security in place.
  • A bridging loan is a short term finance solution where the interest is calculated monthly. There is a huge variance in the deals, bridging loan costs and availability, which makes using a finance broker a highly recommended option.
  • Bridging finance is especially good for buying unmortgageable property at an auction, where there tends to be only a 4 week window to complete the transaction after the sale is agreed, or the buyer stands to lose their deposit that is put down on the day of sale, usually 10 percent.
  • The type of property being purchased is not of great concern for the lender, as their lending is normally determined by the “exit” strategy to pay off the bridge. This makes it ideal for properties being purchased when a change of use will be applied for. For example changing commercial property to residential property.
  • A bridging loan can be a great way to secure the property that you want, to renovate and sell on, when a traditional mortgage is not available. The cost of this sort of finance means that it should never be considered a long-term solution and should only be considered within a broader plan of getting a mortgage. It should be made sure, before you enter into a bridging loan, that you have these long-term arrangements in place. Speaking to a knowledgeable broker, like Ascot can not only ensure your bridging finance arrangement is the cheapest and most suitable for you, but they can find and arrange the mortgage which you may require to follow on from the bridging finance. Please contact us to find the best bridging finance quote available.

    The Financial Conduct Authority does not regulate bridging finance.