There are a number of reasons why a property may not be eligible for a mortgage. In many cases, a bridging loan can be used to finance a unmortgageable property.
There are a number of reasons why a property may not be eligible for a mortgage. In many cases, a bridging loan can be used to finance unmortgageable property transactions.
Derelict and uninhabitable property
A derelict property deemed unfit for human habitation will probably not qualify for a mortgage. After the necessary building work has been completed, however, it should qualify.
If the property is not derelict but has no kitchen and bathroom, then it is probably unmortgageable.
A bridging loan can provide the money to fund the building work, conversion work and extension construction to make a property fit to be live in.
Even if you believe a house is habitable and you apply for a mortgage, a valuer may decide that essential work is needed. This can result in mortgage retention where the lender releases only a portion of the mortgage loan, with the rest available after the work has been completed. A bridging loan can be used to finance the work, then be repaid once the rest of the mortgage funds are available.
Most houses are built from brick, but some non-standard houses are made from other materials. These include timber, prefabricated steel, and houses with thatched rooves. Many mortgage companies will not lend money for what they consider to be nonstandard properties. Lenders regard these houses as more difficult to sell and therefore poor investments.
A mortgage broker may be able to source a mortgage for the nonstandard property. If a short-term loan is acceptable, a bridging loan could be easier to find than a mortgage.
It is still possible in some areas to find houses and flats priced below £50,000. Many mortgage companies will not lend on property worth less than this amount, but a bridging lender may be more willing to consider a loan.
Many bridging finance providers have a minimum loan amount of £10,000 or less.
Landlords and property developers
Bridging loans are particularly useful for landlords who buy large houses that they want to turn into a number of flats. A bridging loan can be used to pay for this work, and then a commercial mortgage can be used for more long-term finance.
Landlords often buy properties at auctions for low prices, but that need renovating. Payment for a winning bid is normally required within 28 days, which is too short for many commercial mortgage applications. A bridging loan can be used to complete the purchase, then to finance the property improvements.
Property developers often buy cheap houses to renovate then sell them on quickly for a profit. Bridging finance is suitable for this type of projects.
Using a bridging finance broker
If you are considering purchasing uninhabitable property, or have inherited uninhabitable property, a bridging finance broker can help you find the best bridging loan deal.
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