Bridging Loans for Investors: Why It Makes Sense

Property investors are often thwarted in their plans by cautious mortgage and bank lenders who deem their projects to be too “high-risk”. The Telegraph recently reported that businesses face “the biggest crunch in lending since the financial crisis”. Those looking to borrow from traditional lenders to fund investment in property may have an increasingly difficult battle on their hands.

Unsurprisingly, a growing number of savvy investors are turning to bridging finance providers to give them fast access to the capital they need. According to the latest “Bridging Trends Report”, bridging loans accounted for 25% of all lending in Q2 of 2019 — an increase of 3% on the first quarter of the year. The most common use of this type of finance is to purchase investment properties. So, why are bridging loans a great solution for investors?

Reasons for Investors to Use Bridging Loans

Seize opportunities when the price is right. The application process for bridging finance is much simpler than it is for traditional loans and decisions are quick. At Apex, we understand time is money and our advisors won’t leave you waiting long to find out if your loan request is approved. Once a loan is offered and accepted, the funds can be in the borrower’s account in as little as seven days. This short time frame allows investors to act quickly to beat the competition to a prime property and to secure it when prices are low.

Flexible funding allows investors to grow their portfolio as they choose. Bridging loans offer a flexible finance option that can help fund the purchase or renovation of a property. Strict regulations constrain many banks and mortgage lenders regarding the type of security they can accept, who they can lend to and the type of properties they can lend funds to purchase. Apex Bridging is not regulated by the FCA (Financial Conduct Authority), which means there is much less red tape and far fewer hoops for borrowers to jump through.

Release required capital if a property sale fails. If you’re relying on one investment property selling to fund your next purchase, a failed sale can result in a missed opportunity. Almost half of all sales in England and Wales fall through before completion. Waiting for a traditional loan to come through could allow a competitor to swoop in — or for the price of the property to rise. A bridging loan can help an investor manage cash flow by releasing the capital required to snap up a great investment opportunity.

Regulated vs Unregulated Bridging Loans

What’s the difference? And which one is right for you?

Regulated bridging loan providers are overseen by the FCA, which imposes strict requirements and obligations on lenders. These requirements can make the application process more arduous and it may be harder for some investors to obtain the funds they need when they need them. Regulated loans are generally residential and can be either first or second charge. The property owner must live in or plan to live in at least 40% of the property. The maximum LTV (Loan To Value) is typically 70%.

Unregulated loans are not bound by the rules and regulations of the FCA. All commercial bridging finance and loans taken out by limited companies are unregulated. Most financing of this type is second charge loans. Providers of unregulated loans such as Apex Bridging can offer a simple and fast application process. We do not require a credit check and consider every application on a case-by-case basis. We offer up to 80% LTV and funds can be available in as little as seven days after loan approval.

How to Get Started

Apex Bridging is the go-to choice for top brokers across the UK. We pride ourselves on the excellent relationships we build with our clients. We will work closely with you to tailor our offer to the specific needs of your client. Contact our friendly team of experts today on 01509 345 007 to or arrange a no-obligation consultation via our simple online form.