The obvious way to purchase an investment property is a buy-to-let mortgage. This is great if you’re building a property portfolio and intend to have a mortgage for a long period and pay it off over time.
However, some investors aren’t buying to let, they may have a buy-to-sell strategy or buy to convert to alternative use – for instance to an HMO, commercial property to flats or serviced accommodation. Standard BTL mortgages don’t work for any of these options.
Fortunately, there are other options for the savvy property investor.
When you really want to take your property investment up a level you need to get familiar with bridging finance. Don’t think of it as a ‘mortgage’, see it as ‘funding my project’.
Bridging offers an excellent way to move your project on and make a substantial profit – more than compensating for the increased interest rate you’ll pay.
So why use bridging finance?
Your potential profit is much more than getting a BTL mortgage and then remortgaging.
Early redemption of a mortgage won’t do your credit record any good at all either. If you do it repeatedly you’ll soon find mortgage lenders don’t want to know. Bridging finance gives you the freedom to turn around short-term projects.
Bridging lenders are picky over the area they will lend in. So some only lend on properties in London, some only in the home counties, some only in the south-east, etc.
Also you need the right lender for your project. Some lenders don’t lend on conversions, some not on commercial properties and so on.
This means that you need to know your bridgers – and there are dozens of them. They’re all different and their fees are all different, the structure of the deals are different – so it can be a minefield for the untutored investor. However, that shouldn’t put you off – what you need is a good broker with the right kind of experience.