With many landlords finding harder to secure a mortgage since the Prudential Regulation Authority’s changes were introduced last year, some buy-to-let investors are turning to alternative finance providers to secure funds.
Bridging finance, for instance, known for its speed, offers much faster time to completion than high-street lenders, which is mainly why this form of short-term finance is growing more popular.
The speed at which bridging finance can be implemented is the main reason for its use. Unlike mainstream mortgage lenders which have been reluctant to increase their short-term and commercial lending after the last recession, a bridging lender provides a real time solution to any potential funding gap by making available the required funding a purchaser needs to acquire property in as little as 24 hours.
Specialist lender Together teamed up with commercial brokerage B2B Financial earlier this month to provide £46,618 to a Walsall-based property investor, enabling him to acquire a plot of land - by re-financing a buy-to-let flat he owns.
The investor plans to build a new buy-to-let property on the land, valued at £50,000, but faced a deadline to exchange contracts on its purchase – so he needed the finance in place quickly to fund his latest venture.
The landlord borrowed the money, against the unencumbered buy-to-let property he had owned for a number of years at 75% loan-to-value. This worked out cheaper than the customer taking out a commercial development loan, which would have proved unaffordable in his circumstances.
Richard Tugwell, group intermediary relationship director at Together, said: “This case just shows how thinking outside the box by trusted brokers and lenders can really deliver for customers.
“The property the customer wanted to borrow against is a well-kept two-bedroom flat worth £70,000 on the open market, so the equity was there in this existing buy-to-let property.
“Now he has the money in place, as well as planning permission to build on the land, he’ll be able to press ahead with his new build property.”