Bridging finance provides a speedy, short-term solution for individuals looking to quickly complete the purchase of a property. Bridging loans are unsurprisingly popular with landlords and property developers looking to either fund a property investment, buy to let or development. But, they are also becoming increasing popular with homebuyers wanting to unblock property chains and secure their dream homes.
What are the advantages to bridging loans?
There are a number of potential benefits to using bridging finance for your short-term finance needs including:
- No credit checks
- Quick turnaround time (often arranged within 24 hours)
- Daily interest rate
- No early repayment charges (on some schemes)
Lenders will however require:
- A completed application form
- Proof of address and identification
- A copy of your buildings insurance policy schedule – We can of course arrange all of this for you!
Is there an alternative to bridging finance?
If you decide that a bridging loan isn’t the right choice for you, then there are other alternatives:
- High LTV Mortgage: A High loan to Value Mortgage with no early redemption charges, should enable you to make a large repayment without incurring a penalty.
- Let to Buy Mortgage: If you have found your dream home but can’t wait to sell your current property, or are struggling to get the price you want for it, a Let to Buy Mortgage will allow you to buy your new home, whilst you’re waiting to sell your existing one.
Where can I get a bridging loan?
If you are considering a bridging loan, make sure you have a clear repayment strategy in place first, which might include; getting a residential or buy to let mortgage or selling the property altogether.
As expert mortgage brokers we can help advise you whether a bridging loan is the right solution for your individual needs and circumstances, or if an alternative finance option would be more suitable.
Some of these products are not regulated by the Financial Conduct Authority
Are you are an undergraduate or parent trying to avoid paying a fortune for poor student accommodation? Some mortgage lenders are now looking at university students as potential customers, which could help you to get onto the property ladder and earn whilst you learn through renting out your spare rooms!
It may seem unrealistic, but with today’s high rental prices and relatively stable housing market, many are finding properties with mortgage repayments are costing less than monthly rental rates, making it a more feasible option.
A sound investment?
Many students choose to arrange a mortgage in partnership with their parents, so that both parties can benefit from the venture. But, which mortgage is best suited to your needs?
With a Buy for Uni Mortgage, students aged 18 and over living in England and Wales, can borrow 100% of a property’s value up to £300,000 to purchase a home within 10 miles of their place of study. However, if you borrow more than 80% of the value of the property, you will need to consider the following:
- A parent or close family member will have to act as Guarantor
- You will likely have to pay a higher interest rate initially. However, if you keep up your repayments, you should be able to move to a standard mortgage, once your deal comes to an end.
If your parents already own their own home, they can also save by not having to pay Stamp Duty Land Tax on the purchase of additional property, as it will be in your name!
Family Buy to Let Mortgages
If you are a parent who either pays or is looking to cover the cost of your child’s accommodation, you could benefit from investing in a property for them to live in instead. You will need a Regulated Buy to Let Mortgage, which can be difficult to find on the high street. But, we can help you find a mortgage deal that suits your needs perfectly! – Remember, if you buy a larger property and rent it out to other students in addition to your own child, you will also need a Houses in Multiple Occupation licence!
Want to learn more?
Our expert mortgage advisers can talk you through all of your available options and compare a range of student mortgage deals, to ensure that you get the right mortgage product for your investment plans and individual circumstances, completely free of charge and obligation!
What to do before becoming a landlord
You’ve bought your first buy to let property and are now preparing for your first tenants, but what needs to be done? You’ll need to make a few big decisions about how you are going to manage your property, and ensure that a number of items are in place before you tenants move in. Luckily, we have compiled a handy list to help ensure that your buy-to-let investment is a complete success!
As a Landlord, you have a duty of care to your tenants, so make sure your property is protected by arranging the following checks and installations:
- Smoke alarm fitted on every floor of the property, where there is a room that will be used as living space
- Carbon monoxide detector installed in every room with a solid fuel-burning appliance
- A valid Gas Safety and Energy Performance Certificate (EPC)
When renting property accidents will happen, which can prove costly if you do not have the right level of cover in place! Landlord Insurance provides the specialist level of cover you need to protect both the structure and rental income of your investment.
As expert mortgage and protection advisors, we can ensure that you get the right level of cover for your personal requirements, so you can be rest assured that your investment is safe.
Do your homework!
Finding the right tenants is often the most complex part of the letting process. It’s important to know who you are letting your property to, and a letting agency can help you with this.
Letting agencies can help mitigate any potential risks by conducting in-depth tenant references, which typically include employment details, addresses, bank statements and references from their current landlord (if applicable). They will also carry out the necessary checks to ensure that that your tenants are legally able to rent in the UK, so you can be rest assured that everything is above board.
Arrange a tenancy agreement
Once you have found the right tenants, you will need to provide them with a tenancy agreement. An Assured Shorthold Tenancy (AST) contract is generally used for this purpose, and contains the proposed dates and duration of the tenancy, a breakdown of the rent payments and the required notice period, if the tenancy is terminated by either party.
Protect your tenants’ deposits
As a landlord, you must ensure that your tenants’ deposits are kept in a government approved tenancy deposit scheme, such as the Deposit Protection Service, who will intervene should a dispute about your tenants’ deposit arise at the end of the tenancy.
Set the bar
Before your tenants move in, it’s important to set out how you expect your property to be maintained, particularly if you decide to let is as a part or fully furnished let. Conducting an inventory before and after a tenancy, will help you to keep check of your assets and their condition, and reduce the chances of a potential dispute – Using a letting agent or independent inventory clerk to make sure this is done correctly, is certainly worthwhile!
Need a letting agent?
Working full-time and being a landlord can be demanding! But, using a letting agent can help to reduce the burden. They can manage all the necessary advertising, viewings, screenings, inspections, repairs and rental income for you. If you favour a more hands on approach, most agencies will also offer a tailored service, so they can help out where needed.
5 steps to become a successful landlord
Becoming a landlord can be an exciting and rewarding prospect; from selecting a property with a potential profitable return, to taking care of your tenants. If you are planning on investing or are simply interested in learning more, here’s our top 5 steps to consider for a successful buy-to-let investment.
Do your research!
When deciding on an area to buy your buy to let property, choose an area that prospective tenants would like to live in with attractive selling points such as; good transport links, schools and / or entertainment facilities – Use property websites such as Rightmove and Zoopla to help you with this!
When you have decided on an area, be sure to also speak to a local letting agent who can help you understand which properties are in demand and how much they rent for.
Hands-on or stress free?
Being a landlord comes with a lot of responsibility! If you choose to buy near to home, you will be close by should anything go wrong. But, if you choose to look further afield, using a lettings agency could be a wise decision!
Letting agents can help reduce the burden, by managing all the necessary advertising, viewings, screenings, inspections, repairs and rental income for you, and the cost for their services varies from a months’ rent for letting only, to an ongoing yearly fee of around 10% of your rental income for full-time management.
When you buy a second property for rental purposes, you need to take out a Buy to Let mortgage. Buy to Let mortgages are very similar to standard residential mortgages, but there are some important differences to note:
- You will need a minimum deposit of 25%, but the more you can put down, the better your interest rate will be!
- The amount you can borrow is calculated on the potential rental income of the property you are looking to purchase, rather than your own income
- Your annual rental income be at least 125% of the annual mortgage interest payments, to help you during tenant vacancy periods.
As expert buy to let mortgage brokers, we can tell you how much you can afford to borrow, and find you the best buy to let mortgage deal to suit your individual circumstances. When you’re ready to move ahead with your mortgage application, our dedicated support team will even handle this for you through to completion, to ensure that your application is a complete success!
What tax will I pay?
As with every property purchase, there are various taxes you will need to pay at some point in the buy to let property sales and purchase process:
Rental income tax: Any rent you receive is taxable and the rate of tax you will pay is charged in accordance to your income – 20% for basic rate taxpayers, 40% for higher rate and 45% for additional rate.
Allowances: You can minimise the amount of tax you’ll have to pay by deducting certain expenses (detailed below) from your taxable rental income up to 20%.
- Letting agency fees
- Buildings and contents insurance
- Council tax
- Utility bills (if you pay them on behalf of the tenant)
- Essential maintenance such as a roof repair or new boiler
Capital Gains Tax: If you choose to sell your buy to let property you will have to pay Capital Gains Tax on any profit you make from the sale, which varies between 18% and 28%, depending on your tax bracket.
Allowances: For the 2017/18 tax year, the first £11,300 profit you make is Capital Gains Tax free.
Stamp Duty Land Tax (SDLT): When you buy an additional property that is not your main residence, you have to pay Stamp Duty Land Tax on it, dependent on the purchase price of the property shown below:
- Less than £125,000: 3%
- £125,001 – £250,000: 5%
- £250,001 – £925,000: 8%
- £925,001 – £1.5 million: 13%
- £1.5 million+: 15%
As a landlord, you will probably have invested a lot of your money into your property, so it makes senses to protect it! Landlord Insurance provides you with the specialist level of cover you need to protect both the structure and rental income of your investment. But, not having the right level of cover can be disastrous – that’s where we can help!
Our mortgage and protection advisors will assess your personal requirements and tailor your cover accordingly, so you can be rest assured that both your investment and income are protected.