Bridging finance is becoming a vital tool for an increasing number of investors who are attracted to a booming buy-to-let (BTL) market amid tougher restrictions on bank lending.
BTL investments have steadily been gaining in popularity, with a growing number of investors attracted to the opportunities and yields on offer compared with other asset classes and traditional savings accounts .
Private rents hit a record high in June 2015: data from the latest Your Move and Reeds Rains Buy-to-Let Index revealed that the average rent for residential properties in England & Wales is now £789 per month, 5.6% higher than a year ago, so it’s unsurprising that the potential returns are attracting a great deal of interest.
However, although investor demand for BTL mortgages has gathered pace, landlords have faced rigid restrictions from growing regulations imposed on banks, making it hard to access funds quickly.
Landlords could face further hurdles – the sector has now attracted the attention of the Bank of England, which is keen to extend its control over the market, potentially making it tougher to become a landlord.
As a result, bridging finance has become one of the main tools landlords use to finance their property purchases to make the most of the opportunities they come across.
Bridging finance is a short-term loan that can be secured against a property and is designed to "bridge the gap”, giving an investor the time and space they need until longer-term finance can be arranged or the property is sold.
Bridging loans enable property investors to access funds quickly, providing them with an opportunity to expand their portfolio and convert properties for the rental market to satisfy the growing demand.
MTF has helped many property investors and landlords looking to capitalise on an investment opportunity over the years, particularly those who do not fit the mainstream criteria or who need to complete a transaction very quickly in order to get a good deal.
MTF recently completed a case for a property investor who needed to raise £455,000 to purchase a £700,000 property in
London. The investor was unable to get a buy-to-let mortgage from
a bank within the timeframe. Faced with missing out on the opportunity to
purchase the property, MTF was approached.
MTF provided a £455,000 bridging loan over a 12-month term at 0.99% per month, with no exit fee or early redemption penalty. By taking out a bridging loan, the client had the time and space to complete some renovations on the property to increase its value. After 12 months he intends to sell the property to repay the bridging loan and enjoy a substantial profit.
In short, bridging finance provides a real-time solution to landlords in need of fast, reliable financing from property funding experts – could it be the key for you?
Tomer Aboody is a founding director of MTF. With over 20 years’ experience in the property market, both in the
UK and abroad,
he brings first-hand understanding to the property finance sector. Tomer is the
driving force behind MTF’s asset-based lending approach and commonsense
attitude to underwriting a bridging loan.