How to Use Bridging Finance to Buy a House in London
04-November-2024
04-November-2024 9:22
in Bridging
by Jennifer Stevenson
Buying property in London is competitive. The market moves rapidly, fuelling a feeling of ‘act now or lose out’ that can ruin many house-buying plans.
While mortgages provide the perfect long-term answer to funding a property purchase, they are relatively slow to set up, come with stringent affordability testing, and rely on steady income to secure.
Clifton Private Finance are experts in bridging finance and mortgages, with in-depth understanding of the London property funding market. Let us share our expertise.
Key Takeaways
Bridging finance provides a key tool for property purchase in London, offering flexibility and rapid funding.
It is often used for auction finance, to secure property while part of a chain, or to buy property for renovation.
The speed of the London property market makes bridging finance especially useful.
Clifton Private Finance have the expertise needed to secure cost-effective bridging finance in the UK capital.
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Understanding Bridging Finance
Bridging loans are so called because they form a bridge between an immediate need for financing and a longer-term solution. Used for property purchases, they provide the initial funding essential to secure the home without delay, later being replaced by an exit strategy that typically involves either long-term finance such as a mortgage, the sale of a previous property, or the refurbishment and sale of the purchased property (house “flipping”).
There are many challenges when it comes to buying a home in London - your funding shouldn’t be one of them. While other cities across the UK have plenty of valuable opportunities where bridging finance helps, London is particularly notable.
Property exchanges hands at a rapid rate and there are plenty of buyers who are willing to jump in and snatch a flat or house from under your nose before you’ve managed to exchange contracts.
Being able to move quickly is vital and bridging finance provides that power.
Bridging finance means:
You can act quickly in a competitive market.
You function like a cash buyer, able to complete a purchase even if your chain falls through.
You have the buying power to stretch bids and outbid competitors.
You can work around any mortgage delays, essential if you’re waiting for someone else to get their mortgage to buy your existing home.
You can buy at auction, confident that you can transfer the full amount for the purchase within the 28 day deadline.
You can buy property that’s in need of refurbishment without struggling for finance.
You can take advantage of unique opportunities that may be time sensitive.
With an expert bridging finance partner alongside, you can get the London property you’re after.
4 Primary Uses for London Bridging Finance
Bridging finance is an incredibly flexible tool that can meet many different needs. Some of those who get the most out of bridging finance in London include:
Those Buying Before Selling
Once you know that you want to buy a property in London, you will want to move quickly. Traditional finance moves at a slow pace and with complex property chains creating further delays, the anxious feeling that you’re going to lose the home you’ve set your sights on will grow.
This provides several advantages:
No delays due to the property chain.
Move immediately, perfect if transferring to a new job in the capital or just to get your family settled earlier.
Secure the property you have your heart set on.
Downsizing to move closer to family or for health issues is accomplished without more difficult waiting.
Upsizing to a bigger home or more desirable location can be done leveraging equity in both properties.
Cash buyer status gives you the power to make better deals.
Selling your existing property doesn’t need to be rushed, enabling you to wait for better offers.
Expats Returning to the UK
If you have a lack of recent UK income, it can impact your credit history and make a mortgage application difficult. This can lead to being rejected outright until you are properly settled back in the country, or having to accept a far higher rate that you will need to remortgage as soon as possible.
Foreign Buyers
For those looking to come to the UK from other countries, either permanently or temporarily, bridging finance offers flexibility in financing while longer term arrangements can be made. This allows for:
Investment in the UK property marketplace from abroad.
Comfortably settling your family in London while your finances are localised and traditional UK funding becomes available.
Important peace of mind when relocating to a new country and vibrant capital city.
Developers and Landlords
Bridging finance is a key tool in the arsenal of developers and landlords, both individual and businesses. The more flexible criteria of bridging finance means:
Ease of buying houses and flats at auction.
Access to funding to purchase unmortgageable and uninhabitable properties as renovation and refurbishment projects.
Expansion of property ownership with London property that can be later folded into existing portfolio mortgages.
Leveraging equity to provide additional funds to service development and renovation.
Rapid buying power to snap up opportunities as they occur.
Capital for full property conversions, creating multiple flats from existing houses.
Low Cost Drawdown Bridging Loan for Development Exit
Many young and first-time buyers look at ways they can save on property, especially in the capital. Gary and Jasmine were both keen to find a property that was cheap because it was out-of-date and needed modernisation, potentially saving tens of thousands by being willing to spend time refurbishing the house. While they were able to find property that fit their requirements - inexpensive and dated - they discovered that they couldn’t get a mortgage to buy anything. Multiple problems became apparent, including:
Mortgages were too slow and couldn’t be confidently put in place before the 28 day deadline for auction purposes, making it hard for the couple to feel confident buying at auction where the best deals were to be had.
Gary planned to take an unpaid six months to a year off work to concentrate on the renovations, but this made lenders nervous and unwilling to provide a mortgage.
The homes they were looking at often lacked working bathrooms or kitchens, classing them as ‘uninhabitable’ and thus ‘unmortgageable’.
Luckily, Gary and Jasmine found Clifton Private Finance. We explained bridging finance to them and worked with them on a full plan that took them through the initial purchase, included budgeting for all the expected renovation costs (including a 20% margin for issues), and to a final exit strategy of a traditional mortgage to repay the bridging loan once the work on the house was done and Gary returned to full-time employment.
Within a month, they’d found a suitable run-down house that had been vacant for years and seen little update since the 1970s, worked on it intensively for six months, and moved in a little while afterwards. It took three more months before the couple’s finances were solid enough to secure a cost-effective mortgage and they exited their bridging finance at the end of the 11th month.
The Lease Extension
Shireen had an emotional and personal reason to buy a specific flat in central London. It had been her grandmother’s home and she had always loved it as a child and was especially keen to obtain it once she saw it up for sale. Unfortunately, there was only a very short time left on the lease, and every mortgage lender she went to was unwilling to provide the funding.
She originally came to Clifton Private Finance hoping to find a specialist lender able to offer a mortgage on the short lease. However, after consultation with our specialist team and an in-depth analysis of the situation, it became clear that the best option was for Shireen to obtain bridging finance. This was because:
The property was being considered by a developer who was keen to renovate and turn it into a rental, which would prevent Shireen ever obtaining it.
Mortgage lenders were keen that she extend the lease.
The lease extension could only be done if she had owned the property for two years, as required by law.
With our help, Shireen decided to seek specialist bridging finance that would cut through the red tape and let her buy the property immediately, before the developer finalised their plans. She sought bridging finance with a two-year term on it and added a full renovation into her plans, to ensure the property value increased enough to secure a large enough mortgage as an exit strategy.
This was all put in place within a few weeks, and Shireen got her grandmother’s flat. Two years later, she was able to complete her plan, extended the lease, and obtained a mortgage on the beautifully refurbished flat to exit the bridging loan. Though she had no intention to sell, the value of her central London flat increased substantially, meaning she had made a comfortable profit.
Obtaining the Best London Bridging Finance with CPF
Buying property in London needn’t be stressful. When you have a specialist broker alongside, you can move forward with confidence. Clifton Private Finance provides:
Decades of on-hand experience for bridging finance in London.
Comprehensive exit strategy planning and remortgage options.
Independent advice that prioritises you and your needs.
A listening ear that will discuss your circumstances with you so that we understand your position and can work 100% on your behalf.
Access to the full marketplace of UK bridging finance lenders.
Advice on complex issues, such as bad credit, self-employment, becoming a landlord, and much more.
Clear breakdown of the pros and cons, with no hidden agenda.
Understanding of the specific needs when buying property in London.
Experience working with those investing from abroad.
A friendly face that will help you get through the whole process without any anxiety or worry.
Working with Clifton Private Finance isn’t a one-off chat leaving you alone afterwards with no support. We are here to become your property purchasing partner, working hand-in-hand to secure you the best rates and most flexible terms, always with your needs at the forefront.
Call us today to speak to a bridging finance specialist and make that dream of a London property a reality.
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