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How to Use Bridging Loans for Property Development

By: Admin

Although once a specialist product, more property developers and homeowners alike are starting to take advantage of bridging loan finance in order to move forward with renovation projects. Whether you’re a seasoned developer or a novice to the topic, we’ve put together this quick and easy-to-follow guide to show you the different ways that bridging loans can be used for property development. 

For each of the scenarios in this guide, we’ve used examples based on real-life deals that our brokers have negotiated in the past. The names of clients have been changed to protect anonymity and some details have been altered. We hope this helps you to decide whether bridging loan finance is the right funding option for you and your property development project. 

There are countless scenarios that we could mention so we’ve kept it to a select few examples below. Should you wish to discuss your specific circumstances in more detail with an experienced broker, please get in touch via our website.

For Home Improvements Prior to Selling a Property

For most of us, our house will be the most valuable asset that we own, so when it comes to selling it you want to ensure that you get the best return possible. Let’s look at how a bridging loan might help in this situation:

Mr and Mrs S have lived in their family home for decades. After seeing their children grow up and fly the nest, they are now ready to downsize and take on something which is lower maintenance and more self-contained. Before they listed the property for sale though, they wanted to update the kitchen and bathroom, install a new driveway and have the loft converted into a fourth bedroom. They did all of this to try and get their asking price closer to the price cap for their local area.

The couple knew that if they could spend around £50,000 they would add so much more value. And with the housing market being as heated as it was and very much a seller’s market through 2021, they knew they could be onto a winner if they acted fast. So they got in touch and spoke to a Whole of Market advisor at Your Mortgage Options. 

We not only helped them to access the best bridging loan finance deal available; we also helped to arrange the surveys, the solicitors and guided them through the whole process from end to end. We even helped with the application forms and paperwork.

Mr and Mrs S managed to secure a bridging loan against their property which meant that the money was available in just a few days. They completed the work and cashed in on their family home at a great time, ready to enjoy their twilight years in a new home with a little left over to share with their children too.

Bridging Loans for Auction Purchases

There are many excellent development opportunities available via auction, whether this is the purchase of a property or land. Yet buyers often don’t have all of the funds available on the day of the auction in order to buy it outright. With 10% deposit required on the day and the other 90% required within 28 days, bridging finance is an ideal option to bridge the gap before funds become available or a long term loan can be secured. Let’s take a look at how this worked for a previous client:  

Gary and Paul are both tradesmen who wanted to try their hands as property developers. A property came up at auction which was well located for commuting and with access to good local schools. They knew that this was a great opportunity for them to create a beautiful home for a young family and turn a great profit.

They spoke to Your Mortgage Options about what they could do to raise the money to buy the property and also to fund the development. Even though Gary’s credit history was less than perfect, this didn’t affect the business plan because the bridging loan finance could be secured against the property. 

With a little help from our team they were able to secure the right loan because they had a sensible exit plan: sell the property for a profit and repay the lenders. Even if they failed to do that, the security in the property was sufficient to ensure that the funding was available in just a matter of hours from when the application went in. Good Luck with the project, fellas!

You can learn more about securing bridging loans with bad credit here.

Bridging Loans for Adding an Extension

Bridging loans aren’t reserved only for experienced property developers. Any homeowner wanting to renovate their property can take advantage of this source of financing too. Bridging loan finance offers ready access to the full amount needed to complete a project, so the owner or developer has the flexibility to manage the work as they see fit. Let’s explore a real-life example to see how this might work: 

The Thompsons were happy with the location of their Manchester family home, but with a growing family they needed to be able to accommodate the newest additions. They envisioned adding a sizable extension and a large loft conversion to their detached property, which would mean that they could have a separate dining room and two new bedrooms. 

They got in touch and spoke to an advisor in Manchester via Your Mortgage Options. As with any bridging loan application they had to pay for the surveys and legal fees, but the equity in their property provided them with the security they needed to access a bridging loan recommended by our team. Mr and Mrs Thompson were new to property development so we were thrilled to help them turn their dream into a reality.

The home extension project was completed as planned within a year. The family were then able to remortgage to clear the bridging loan and continue to thrive in their expansive and stylish family home.

Bridging Loans for Housing Developments

Bridging Loan Finance can be extremely useful for larger projects like the development of new build properties. With quick access to large sums of money (up to £25 million), bridging loans enable developers to take advantage of opportunities which might otherwise be missed. Let’s explore an example below to learn more: 

Mr & Mrs D had a patch of land next to their paddock which they wanted to build a dozen or so properties on. The plan was to turn some into holiday lets and sell off the other houses to local families so as to clear the bridging loan finance. This exit plan mitigated most of the risk with the project.

They reached out to our team and we were more than happy to point them in the right direction and assist with the bridging loan application process. Mr and Mrs D secured the funding they needed and construction is currently underway – we can’t wait to see the results!

Get in Touch

To see how we might be able to help you and your project, get in touch to discuss bridging loans for property development today. Our team of brokers are authorised and regulated by the Financial Conduct Authority.

Your Mortgage Options is a broker, not a lender and our panel of lenders covers the whole of the market. Bridging loan finance is available in amounts from £25,000 to £25,000,000 and the funds can be made available in as little as a few hours. Typically interest rates as a guide can be from 0.65%-0.85% per month but are subject to application.

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