Manchester’s population is reaching record levels and together with domestic and international investment in the property market the level of transactions, prices and rental values across the region is being driven upwards. Unsurprisingly, we have seen many lenders, both mainstream and challenger banks, offering competitive and even record low rates of interest (Atom Bank’s 1.29% five-year fixed-rate mortgage was pulled just a week after its launch due to huge demand for the product).
But for those looking to invest in property, how do they decipher the jargon and determine the most appropriate funding option?
Below, we have summarised a range of debt funding options available in the current market:-
Commercial and Buy to Let mortgages are provided by banks to finance the purchase of business and investment properties. Types of mortgage available include repayment, commercial endowment or pension. The mortgage will usually be repayable over a 15-year period although many lenders will now offer bespoke terms based on the particular circumstances.
Crowdfunding platforms are now increasingly targeting investors to invest as little as £1000 in developments or projects. This allows developers and purchasers to gain access to funds at lower rates than offered by banks whilst also allowing smaller investors to gain a higher return than the interest rate they would receive in their savings account. Crowdfunding property portfolios can include Buy to Let, Buy to Sell (“flip”), loan-note investments and private equity co-investments and so give a purchaser a wide range of alternative funding options.
Bridging loans are designed to help people complete the purchase of a property quickly by offering them short-term access to money, albeit at a higher rate of interest and with (often) higher administration, facility and repayment (exit) fees payable on top. A loan of this type can be particularly helpful for those investors buying property at auction (where completion timescales are typically a lot shorter e.g. 28 days) or for helping buyers where there is a gap between the sale and completion dates in a chain. In a commercial context, it is often used as a means of releasing equity to fund investment elsewhere.
How do I find out more about funding options?
Here at berg we have specialist advisors experienced in dealing with all types of funding options and can provide support whether to a first time buyer or a seasoned property investor. Our Real Estate Finance and Banking Teams deliver high quality advice and always with a focus on delivering value for money and on achieving completion in as timely and as stress-free manner as possible.
To find out more about the issues raised in this post, or to discuss any queries regarding funding for property please get in touch with Michelle Howell on firstname.lastname@example.org or call +44 (0) 161 829 2599.
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The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by berg or any of its partners or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.