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Power up your equity

bridging finance May 20, 2018

When you launch your property career it’s rare to be cash-rich.  However, most investors own their own home – and frequently have substantial equity in their property.  So it’s obvious – remortgage your home, release a chunk of money and you’re off and running.  Or is it?

If you’ve got an unencumbered or low-geared (less than 25% LTV) property, you’ve got collateral.  But why incur mortgage payments and interest when you don’t need to?

Confused?  This isn’t as complicated as it might sound.

So if you decided to release equity to provide you with deposits for a few buy-to-let properties, you’ll have to make the application, wait for it to come through and then you’ve got a chunk of money sitting in your bank account.  It’s not earning anything there, but you’re already paying interest on the mortgage and your monthly income will have to cover the mortgage payments.

How many weeks or months will it be before you find suitable BTL properties to purchase?  All that time you’re paying for that chunk of equity you’ve released.

Do things differently

Instead of releasing your equity into cash, there’s a better way.  And it gives you the speed of being able to buy as a cash buyer, but without having already released equity from your home.

Quite simply it’s by using a bridging lender.  If the equity you want to borrow against is in your home, it’s virtually a certainty that a bridger will lend. 

The bridger is not interested in your ability to make payments and won’t expect you to complete any income and expenditure sheets.

What are the pluses?

  • If you’re asset-rich, but income poor, bridging finance is not based on your ability to make monthly payments.  The equity in your property reassures the bridger that they can get their money back in the worst-case scenario.
  • Bridging is great for cash flow.  Normally there are no monthly payments, instead interest is incorporated into the loan.
  • Bridging decisions are made quickly.  You can get your money in a matter of weeks rather than months – sometimes in as little as one week.  Of course, this is dependent on you having the right solicitors working for you – who understand bridging.
  • You can be pre-approved for bridging finance so you can provide proof of funds if needed and the money to exchange and complete is there waiting for you to draw.
  • With bridging finance you are operating virtually as a cash buyer.  This means that vendors expect to get lower prices – no cash buyer pays full rate.  That gives you higher profits, more flexibility and the potential to build your portfolio quicker.

You will need to do your sums and ensure that you have enough cash to carry out any refurbs needed.

If you want to learn how to really apply bridging finance to property investment, why don’t you come and find out more on one of my Masterclasses?

You can learn more here:

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