The UK property investment finance sector has grown significantly in recent times. There is now an array of different financial vehicles to satisfy any property investment scenario. While many of the following property investment finance routes are straightforward, there are some you may not have come across before.
High street mortgages
The traditional high street mortgage is more common amongst domestic buyers looking for their own home. The UK mortgage sector tends to focus on capital and interest payments but there are some interest only mortgages available through specialist lenders. In places like the USA it is possible to fix the mortgage rate for the full tenure but this is not commonplace in the UK.
Second charge mortgages
As the name suggest, a second charge mortgage would see the lender taking out a second charge over a particular property. This may or may not be the property in which the borrower lives. For many borrowers this style of finance is often seen as a loan top-up as opposed to re-mortgaging. It is also a very useful way of utilising your full portfolio of assets.
While high street mortgages and second charge mortgages will take account of your income when calculating the affordability factor, it is different for commercial mortgages. These tend to relate to assets such as shops, factories and offices and will focus more on the company’s ability to pay as well as the asset base. Commercial mortgages are a useful means of raising finance at relatively short notice for investment, development or expansion.
Buy to let mortgages
The buy to let mortgage sector in the UK is extremely mature and very competitive. There has been a slight reduction in demand for buy to let mortgages in light of the UK government’s recent tax changes. However, the buy to let mortgage market always bounces back and learns to adapt and accommodate various changes to the taxation system. Many lenders will not take into account potential rental income from the buy to let asset and tend to focus on the borrower’s personal income.
Residential bridging loans
Residential bridging loans are a very useful means of raising finance to bridge a gap in capital receipts and capital payments. They can be useful for those acquiring a new property before selling an existing home. They are also commonly used by property developers looking to add value to a property.
The idea is that the increase in value of the property would be significantly greater than the cost of the residential bridging loan. So, upon completion a traditional remortgage arrangement would be made (often already in place when the residential bridging loan is agreed) allowing the developer to pay off the residential bridging loan and hopefully bank a profit for themselves.
Commercial bridging loans
As the name suggest, commercial bridging loans are more akin to commercial property as opposed to the development and remortgaging of domestic property. However, this type of finance can be used in the same manner, developing a property and then remortgaging on a higher value. Due to the focus on commercial property and commercial operations this type of loan is not as easy to secure as domestic finance.
This is just a selection of the different types of finance available for those looking to invest in property. They range from a simple vanilla high street mortgage to property bridging loans which can help to release a significant uplift in asset value. The interest rates charged on the above property investment finance will depend upon income, security and, in some cases, an exit route.
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