The Benefits of Unregulated Bridging Loans for Property Investors
With the UK gripped by Brexit uncertainty and the ongoing Coronavirus-related economic shutdown, lenders are demonstrating understandable risk aversion. Conventional loans and mortgages are becoming more difficult to access, though there is one alternative form of funding that continues to grow in both popularity and accessibility.
Unregulated bridging finance has the potential to serve as an invaluable lifeline for property investors and developers from all backgrounds but what is the main difference between regulated and unregulated bridging finance?
Regulated vs. Unregulated Bridging Loans
The main difference between the two types of finance is, as the name suggests, its regulated status or otherwise. Regulated bridging loans are those that are overseen by the Financial Conduct Authority (FCA), which can exclusively be taken out on properties where the applicant or their family or extended family occupies, has occupied or plans to occupy at least 40% of the property. The only exception is when a second charge bridging loan is arranged on a residential property which will raise funds predominantly for business related purposes.
Subsequently, this renders regulated bridging loans inaccessible for most commercial borrowers.
Unregulated bridging loans are free from the restrictions that govern regulated bridging finance, allowing for much greater flexibility and easier access. Bridging finance is a popular choice for new and established property investors alike, providing fast bridging loans and funding with rock-bottom borrowing costs.
Here are just a few of the potential benefits and applications of a competitive unregulated bridging loan:
Quickly Raise Capital
If a rapid injection of capital is needed, bridging finance can be uniquely quick and easy to access. With no FCA regulations or red tape to negotiate, decisions can be made independently by lenders within a matter of hours and the required funds provided within days. There are also no limits placed on how much can be borrowed as property investors often requiring extensive funding to cover the costs of their projects.
No Monthly Repayments
Bridging finance is offered as a strictly short-term solution, which in most instances is repaid in the form of a single lump-sum payment. Loan terms vary from six to 18 months, during which there are no monthly repayments involved whatsoever.
Not only can an unregulated bridging loan be used for any purpose, but it can also be secured against almost any type of property. This includes the kinds of uninhabitable and ‘high-risk’ properties that would not be considered viable by any conventional lender.
Time-Critical Investment Opportunities
One of the biggest points of appeal with bridging finance is the speed and simplicity with which the required funds can be accessed. This can be a godsend for investors looking to purchase properties at auction, or in any instance where a time-critical investment opportunity presents itself. The funds required to finance the purchase can be accessed within days, rather than the usual weeks or months.
Poor Credit Applicants Welcome
Last but not least, a poor credit history will not necessarily count you out of the running for a bridging loan. Decisions are reached primarily based on adequate security provision and exit strategy viability, not past financial performance. Working with an independent broker is essential to ensure you get the best possible deal, particularly if your credit report is not as strong as it could be.
For more information on any of the above or to discuss your requirements in more detail, contact a member of the team at UK Property Finance today.