Most people and property investors purchase homes by using a mortgage, but there are several types of property that mortgage lenders regard as ineligible. If a buyer does not have cash, a bridging loan can provide the necessary purchase funds in these instances.
Derelict property is not fit to live in without spending several thousands of pounds in building work. A bridging loan can provide the funds for to purchase the property and undertake the building work. After the property has been restored, it will be eligible for a standard mortgage and the bridging loan repaid.
Investors often purchase derelict buildings at low prices, use a bridging loan for the construction work, then resell the property for a profit.
No kitchen or bathroom
A property may be in good general condition but have no kitchen and/or no bathroom. Alternatively, it could have a kitchen or bathroom, but they are in a very bad condition. Working kitchens and bathrooms are considered essential for a home to be classed as inhabitable and mortgages will not be available to purchase them if they are missing or not functioning.
A bridging loan can be used to purchase property and fund the installation of a new kitchen and bathroom.
Houses of unusual construction
Homes classified as ‘houses of unusual construction’ include concrete pre-fabs, glass houses, corrugated iron homes, metal framed houses and ones with thatched roofs.
Some lenders will not provide mortgages for such house, and those who will provide a mortgage may charge a larger deposit or a higher interest rate.
It will probably be easier to get a bridging loan for a house of unusual construction if you are able to repay the loan before the loan period ends.
Property with structural issues
If you are purchasing a property and a lender has given you an initial mortgage offer, this will be subject to a surveyor’s report. If the surveyor finds serious structural faults in a house, then this could cancel the mortgage offer, or make it subject to the necessary building repair work being finished.
A bridging loan can be used to buy the home then fix it to allow the mortgage application to be completed.
It is possible in some areas of Britain to find houses or flats for under £40,000. Many lenders do not offer mortgages under £50,000, even for houses that are in a habitable condition. A bridging loan can be used instead.
Limited lease property
Many flats have a limited lease time left. Even if there is 50 years left on the lease, this is considered by many lenders as short-term and they will not provide a mortgage. A bridging loan can help in this situation.
Applying for bridging loan
If you are purchasing or developing an unmortgageable property, talk to Ascot Mortgages who will be able to find the most suitable bridging finance lender to help you buy and upgrade property, even if you’re self-employed.