Sep 15, 2015
I have 3 ex-council flats in concrete blocks with no mortgage on them. I have tried to get a mortgage but cannot find a lender who will lend on them. I want to use the money locked in the flats to buy more property, can you teach me how bridging finance works and if that would be applicable to these flats?
Perhaps it might help if I gave you a few simple facts about bridging finance:
- it is short term finance taken over a matter of months
- it is used to buy properties at one price then to sell or refinance at a higher value, sometimes referred to as forced appreciation
- the increase in value over a short time period is usually achieved by either buying below market value, refurbing to create a higher value, or sometimes a combination of both
- it is asset based lending whereas, by contrast, mortgages are income based lending
- it is quicker to arrange than mortgages, allowing you to negotiate to buy properties much more quickly, rather like the speed at which a cash buyer buys property
- it is, without doubt, more expensive than mortgage lending, but the extra cost can often be offset by being able to negotiate to buy the property much quicker for a lower purchase price
- it allows you to buy properties that are not mortgageable because they have some problem that means mortgage lenders won't lend
- it is imperative that you understand what that problem is, know you can solve it, know that the value you add by solving it is considerably more than the cost of solving it
- the security provided is always the property you seek to buy
- if, like you, someone already owns properties with no mortgage these can be offered as additional security as an alternative to using your hard cash
- there are a number of bridging lenders, all with differing criteria in terms of location of property, value of property, size of loan, costs, length of loan, type of property, borrowers history etc... so using a knowledgeable specialist bridging brokerage is essential in ensuring you make the right choice of lender
Simply put, flats in high rise concrete blocks are tough to mortgage because lenders see a poor resale demand and fear they could get stuck with it if they ever have to repossess you. However, bridging is easily available on this type of property if you want to use the equity in them instead of hard cash to buy new properties, add value then sell or refinance to repay your bridging loan. The key to being successful in this in to be sure you increase the value of your new property by enough to repay the bridging loan on your high rise flat.
It is tougher to teach you how to do this remotely – but you can always join one of the workshops that will take you through this whole process one step at a time.
The workshops run in 3 locations, London, Bristol and Birmingham and, from 2016, we are adding Leeds too. You are welcome to book on whichever one is most suitable for you to attend. The cost is £697 for the day but you get a unique opportunity to get that refunded in full. If you buy the type of property and finance it how you are taught at the workshop, then use my brokerage Positive Property Finance to finance it; when you complete the purchase I will refund your £697 in full. I have done this with a number of investors already.
You can learn more here: