Bridging loans help landlords capitalise on rough diamonds

Published: 03/02/2014

Landlords are increasingly turning to bridging loans to expand their property portfolio, latest figures suggested.

According to one bridging lender, 2013 saw a 25 per cent uplift in the number of buy to let investors taking out a bridging loan. There was also a 5 per cent increase in the average loan size - £220,000 – compared to the previous year.

Bridging finance is a short term loan which helps finance the purchase of a property for a short period of time. This can be for a number of reasons including purchasing property at auction, buying off plan and purchasing property in need of severe refurbishment when a standard mortgage lender would not be able to fund the project.

Unsurprisingly terrace and townhouses (36%) are the most popular buy to let investments, closely followed by flats (29%). But with families becoming a growing market for landlords, semi detached (9%) and detached properties (5%) are also being funded by bridging loans.

Rob Denman, Head of GW LET, comments on this recent demand:

“With property prices on the rise again it is no surprise that landlords are stepping away from ready-to-go properties and are trying to find a rough diamond. High street lenders however are still reluctant to lend on something that doesn’t at least have some sort of sparkle. A bridging loan can offer landlords the opportunity to purchase what residential lenders may perceive as high risk.”

Bridging loans should never been seen as a long term finance option because, as you may expect, it can be an expensive alternative. Goldsmith Williams advises anyone considering a bridging loan to be fully aware of the risks involved and to have a realistic exit strategy.

Content correct at time of publication

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