Bridging Loan finance is ideal for those looking for quick funds to purchase a property. It is a flexible solution, and you can use it for any legal purpose such as renovating a property, buying property at auction, solving business cash flow problems, purchasing land and many more. On the other hand, when traditional mortgage loans are not flexible, you can not purchase land or non-standard property by using these funds. Instead, you can take out a Bridging loan UK to purchase land for development for any purpose. Here in this article, we are going to provide you with all the essential information about land bridging loans.
How Does Land Bridging Finance work?
Bridging loans for purchasing land work in the same way as that we secure to buy a residential or commercial property. These types of debts are fast to arrange and are flexible compared to traditional property loans. However, they come with a high-interest rate due to their short term nature. The land you have bought by using bridging finance can be used for commercial or residential purposes, but you must have planning permission in place. The decision of lenders usually depends on the viability of the investment and the strength of your exit strategy.
Is It Difficult To Get A Land Bridging Loan?
It is a bit difficult to get a land bridging loan because most lenders refuse to grant such a loan because of the risk involved. In addition, some bridging loan providers who provide funds to purchase land may ask you to put up extra security and offer high-interest rates. Keeping these factors in mind, it is vital for you to do research and have complete market access so that you can find an appropriate lender. You can take advice from bridging finance experts that can help you in securing a loan at an affordable rate.
Eligibility Criteria For Land Bridging Finance?
The eligibility criteria can vary from provider to provider, and all the applications are assessed on a case by case basis. However, when it comes to land bridging funds, lenders consider certain factors before deciding the interest rate. Borrowers who meet the following criteria can get the most favourable deals.
If you do not have planning permission, it isn’t easy to obtain a loan. Even if you are able to get a loan without planning permission, you have to pay a high-interest rate, and it is likely to have capped LTV. On the other hand, when you have planning permission, the bridging lender considers you as a low-risk borrower and more likely to offer a loan at a better rate.
The credit score is not necessary for some bridging loan providers UK as they are more concerned about your exit strategy and the value of the property you are using as security against the loan. But if you have clean credit, it will help you in convincing lenders that you are a low-risk borrower. This way, you can get quick approval and secure a loan at the best affordable rate.
An exit strategy is one of the essential things that bridging lenders consider before granting a loan. They want to have a look at the proof that your exit plan is realistic so that they can figure out the level of risk involved. Your exit strategy explains how and when you will repay the loan amount. Typically, it consists of remortgaging or selling a property. It greatly impacts bridging loan interest rates; the stronger the exit strategy, the less interest you have to pay and vice versa.
Experience in Property
Not all lenders are concerned about your experience in property or land development. However, if you have experience in the property, you can convince your loan provider that you are able to achieve the goals for which you are borrowing money. If your project is complex, the lender may insist on experience and ask you to show evidence of projects you have worked on previously.
You can take out bridging finance for land purchase if you have a viable exit strategy, planning permission, and clean credit score. When taking out a loan, you should compare bridging loan providers for interest rates and loan terms so that you can secure funds that best meet your requirement.