Bridging loans have long been the go-to solution for many property professionals, there are other financing methods that could offer better benefits depending on your specific needs.
Bridging loans, undeniably, have earned their place in the short-term lending market. They’re quick, flexible, and allow borrowers to leave their existing financial commitments untouched. This last point has been particularly beneficial for property investors who hold buy-to-let mortgages at rates they’d prefer not to disrupt.
But as with all investment tools, one size doesn’t fit all. There are situations where other financial options could be more advantageous.
Revolving Credit Facility: A Quick Access Solution
For landlords aiming to grow their portfolios or embark on refurbishment projects, a revolving credit facility could be a game-changer. Here’s why:
- Quick Access to Funds: Without the need to undergo the application process each time, borrowers can quickly capitalize on property investment opportunities or handle pressing business situations.
- Combatting Developer Dilemmas: Developers often grapple with acquiring materials in a timely manner, which can escalate costs. A revolving credit facility can proactively address this by providing necessary capital right at the onset of a project.
- Property Upgrades: Landlords can leverage this facility to fund property enhancements, driving up its value and potentially drawing in higher rents.
Recognizing the potential of this tool, some lenders offer a drawdown product for seasoned property landlords. This facility allows them, following a thorough underwriting process, to lock in a pre-agreed limit against an unburdened asset, boasting up to 75% Loan to Value. Over a fixed timespan, they can draw down as needed, only bearing interest on the withdrawn amount.
The Homeowner Business Loan: Equity Release with a Twist
For property professionals keen on unlocking equity from their primary residence for business ventures—be it for new machinery, inventory, or property acquisition—there’s the option of a homeowner business loan. This alternative boasts numerous benefits:
- Quick and Short-Term Access: Unlike a second charge mortgage, this loan grants access to funds faster and for a shorter term.
- Protecting the Portfolio: If a landlord’s collection lacks the necessary equity or faces issues with a first mortgager, this loan comes to the rescue without disturbing the existing portfolio.
One emerging trend among landlords is leveraging this loan for Energy Performance Certificate (EPC) upgrades. Although the 2025 EPC deadline has seen some delays, the demand for rental properties with EPC ratings of C or higher continues to rise. This is especially true in the face of a cost-of-living crisis, where energy-efficient homes are a hot commodity. As a cherry on top, an improved EPC can unlock access to attractively priced ‘green’ mortgages.
Conclusion: Choose What Fits Best
While bridging finance remains a strong contender in the property investment toolkit, it’s essential to gauge when alternatives like a revolving credit facility or homeowner business loan might better serve your objectives. Whatever your choice, ensure it aligns seamlessly with your investment strategy and long-term vision.