August 2016 - First 4 Commercial

When should I consider a bridging loan?

As far as short term funding options are concerned, bridging loans can be an excellent option. Surprisingly though, not everyone knows or understands that much about them. Here, the first4commercial team discuss bridging loans; what they are, and when they should be considered.

Essentially, bridging loans are used to help complete the buying of a new property before the funds are in place from the property being sold. There is often a gap between the sale and completion dates when you are part of a chain. Although the rates can be high, as much as 18% per year, they are usually far cheaper than the alternatives.

Typically, this type of finance is aimed at landlords and property developers, as well as residential buyers. It should be considered when you don’t have time to speak to a traditional lender because you really do need the funding straight away. It is important always to have an exit strategy that allows you to pay off the loan as soon as possible. This is usually in the form of equity that becomes released when your other property has been sold.

Lenders will usually ask to see proof of your exit strategy before agreeing to the loan, and you need to be honest about the source and amount of money that is coming your way. Your exit strategy can also be in the form of a mainstream mortgage later on down the line.

It is always advisable to speak to an FCA regulated lender when considering a bridging loan. Contact us at first4commercial today for more information.


Commercial Mortgages: The Basics

Commercial mortgages are an excellent option for those who are thinking about expanding their current business. While they can be ideal for many businesses, it is a very wise idea to familiarise yourself with the basics before speaking to a potential lender.

You should first take a look at your own trading history before applying for a commercial loan, because this will have to be in good order for them to consider you as a customer. In terms of Loan-to-Value amounts, if you were looking to borrow a sum of £200,000, you would have to have around £100,000 saved up for your new business investment.

Another fact that is often overlooked is that the type of business that you run will have an effect on both the amount you can borrow, and the associated interest rate that you are offered. Owner occupied business like shops or offices will typically be offered a loan-to-value amount of 80%, whereas you will be looking at a maximum of 75% should you decide to lease out your units once buying them.

You should also be aware of how much equity is available when offering security to your lenders. By confusing or overestimating this amount, you can easily overstretch yourself when applying for a commercial loan. Speak to the team at first4commercial about the range of lenders available when discussing a commercial loan, because they often have preferred asset types when dealing with borrowers.

Finally, if you are buying a brand new property, remember that the fees can and usually will be higher.


Choosing an Area for Buy to Let Investment

As far as buy-to let mortgages are concerned, now is as good a time as any to enter this exciting investment arena. But before you do, it is wise to spend a considerable amount of time looking at the best areas to choose. Here, the first4commercial team cast a discerning eye over exactly what you need to be aware of when doing so.

Don’t make the common mistake of buying a property to let just because you live in that area; there could be better investment opportunities available elsewhere. You need to be looking for a variety of promising, appealing qualities when considering this:

Schools – This is always a good selling point even if your potential renters don’t yet have a family of their own. They may see your property as a long term option, and areas with good schools tend to be easier to rent as a result.

Commuting – You may not want to buy a property with a heavy industrial estate nearby, but you should consider how easy it is to get to work. Look for areas with easy access to nearby cities and do a little research about the nearest business centres.

Affordability – Some areas will offer better bang for your buck, so maybe that slightly cheaper part of town will have a 3 bedroom property for the same price as a 2 bedroom terrace house elsewhere?

Remember that the bottom line is finding somewhere that will let quickly, and therefore maximise your ROI at the end of the day.

Login to your Account