What Kind of Properties Can Be Bought With Bridging Loans?
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with Rory O'Mara
Rory is the Owner of Closed Bridging Finance which provides bridging, development, HMO and Auction Finance from £26,000 to £1M for both commercial and residential property.
Bridging loans are generally used to either purchase the kinds of properties that cannot be mortgaged, due to disrepair or to in instances where an investor needs a competitive edge. If a mortgage can be obtained then in most instances this will be the cheaper, easier and more correct way of financing an investment.
Amy: What kind of property can we buy with bridging loans? Are they for any type of property or are there any restrictions, at all?
Rory: Generally, any type of property would be the answer but now, we have to dig into it and say... So, let's look at it and we'll split it into regulated and unregulated.
Regulated Loans
Rory: So, a regulated loan would be the house that you live in, which would be known as your main residence or your principal private residence.
You could borrow or you could use bridging funds to buy your main home, maybe it needs major works. It is just, it is a regulated transaction and that means the money that's lent, we've got to go through much stricter processes.
We're regulated for credit broking. So, I have, as part of my team, someone who is regulated and they're able to do that.
So, yes, we can do it, if it's appropriate. It's all about if it is appropriate because if you can use a regular mortgage, use a regular mortgage because it would be cheaper and correct.
So, you could do that, which is regulated. And, actually, if I give you an example, we had a couple approach me, about four weeks ago, five weeks ago, they had a property which was, essentially, two houses, we say, knocked into one. They're now knocking it back into two separate dwellings. One will be sold. One was their main home, they'll turn that into a buy-to-let and then they are moving to another property which will become their main home.
So, on that project, this regulated member of my team, my network, we... It's a small loan, I think they were buying at £330k, with £220k to go in. So, a £100k loan. Very low gearing, which is low loan-to-value (LTV), under 40%. We have a regulated lender and I think the rate, on that, was something like 0.5%, 0.55%, incredibly low. Very, very simple.
And, funnily enough, I just found out today, that's all been approved. I think, on December 11th, that's when they want to complete and that will go through.
So, that's regulated.
Unregulated Loans
Rory: Unregulated, could be for investment purposes. So, it goes back to the point you raised earlier and that is, it is appropriate to use bridging when bridging is the right product.
If it's run down, you've got to do major works, it's not mortgageable or you need a competitive edge, then you would use a bridging loan.
Amy: Okay, perfect. Thank you.