Financial expert Mike Collins Mortgage Broker is here to help you find the best funding options for your builds and renovations.
“If you’re looking to kickstart a project – whether it’s something large scale or a buy-to-let property – you’ll want to look at your finance options unless you’re sitting on a very large pot of cash!
“Property finance is a term that applies to many types of funding, and I will run through the main options in this article.
“Whether you’re a one-man band or you have a massive mix-use development to build, this guide should help you to find the loan you require.”
Here, Mike Collins advises on some of the best methods to fund your property project:
Which finance suits your project?
It’s important to note that eligibility criteria will be the main reason for being accepted for funding – and this varies from lender to lender. They may judge you on how good your business plan is or on your personal credit score.
But quite often, unless you have a lot if inheritance or have a lot of cash readily available, you will need some funding options, and often these come with high interest.
Buy-to-let mortgage
If you want to buy a house to rent out, you can apply for this type of mortgage, but you must check terms with regards to subletting the property.
Be warned, you could be expected to find as much as a 25-40% deposit. You may also experience higher fees in the current market.
Personal loan
Sometimes called an unsecured loan and is a quick option for needing to purchase a large asset, such as a property, fast.
This kind of funding is not secured against your property or another asset.
You can choose to pay fixed repayments but the best thing you can do is be able to pay the loan back in full by the end of the term.
Bridging loan
This is a short-term solution which is a great option to have, but it comes with a very high interest rate.
If you have seen a property, you’d love to own but you need the deposit for it from the sale of another property development, this type of loan could be very useful as a way to ‘bridge’ the gap until your funding is available – a good option if you want to buy a house at auction.
Bridging finance can also be used for lighter refurbishment at your current property such as decorating, plastering or a new boiler.
If you need cash quickly, this is also a great option with money available very quickly.
A bridging loan credits you for that brief period until your property is then sold, and you have the funds to pay back the amount.
Property development loans
If you prefer a loan that is paid out in stages, this type of funding may suit best and is preferable for bigger projects.
The first payment is normally used to buy a development site – this could be land for a number of new houses to be built or it could fund a flat that needs refurbishment.
The second part of the loan is used to pay for other costs that may be associated with the building works, and this can be paid in stages as they are finished. This is known as staged drawdown.
The loan is agreed at the outset and repaid through mortgage finance or when the property is sold.
Cash
Cash is the simplest way to finance a property development – but not many people have a lump sum to spare from their savings. It’s always great to use if you have it as you can avoid high interest rates and loans. If you don’t have the full amount in cash, you could pay the largest deposit you can to avoid having to take out large loans.
