Historically clients have approached ABC Finance looking to buy a property quickly, under auction conditions or similar and have used bridging finance to complete the transaction on time, paying all the fees to do so before refinancing to cheaper debt. This process is then replicated for each purchase and the client gradually moves forward.
Some lenders are now looking to help clients increase the number of properties they can complete on and reduce fees by offering them a property hunting licence, a pre-agreed facility. By having a facility in the background that allows them to go out and purchase quickly and safe in the knowledge that they will be able to complete, they can act as quickly as a cash buyer and negotiate a discount, often of more money than the loan is likely to cost them.
How Can The Lender Pre-Agree A Facility Without Seeing The Property?
Lenders who are willing to offer a flexible facility like this tend to secure themselves against properties held in the background, whether it is totally mortgage free, or even has a reasonable amount of equity to secure against.
As the security is against an existing property that the client is already comfortable with, they are generally unconcerned by the property you plan on purchasing and it means you can often add even more value by purchasing properties in need of either full renovation or even potentially ideal for extension or conversion.
Is This Type Of Facility More Expensive Than a Standard Bridging Loan?
No, as a matter of fact, as you only pay for the money when it’s drawn down it usually works out cheaper than traditional bridging loans.
Does The Lender Insist On a Survey Report On Every Property I Buy?
No, as the security for this sort of product is either your existing portfolio, or a single property with sufficient equity, there is generally no need to complete a valuation report on the new property, although buying a property without may be risky on your part.
The savings can continue as you will only ever be charged standing bridging loan rates, regardless of the condition of the property you purchase and the works you plan on completing. With standard property refurbishment loans the cost of borrowing can often increase significantly, something that property hunting licences can protect you against.
How Quickly Can I Complete On a Purchase?
As your facility is already agreed and ready to drawdown, it is often possible to complete on a purchase in under a week. It is of course crucial that the full legal process and other checks are completed to protect yourself, but this will be purely for your own benefit, not the lenders.
A property hunting licence allows you to purchase properties under value, extend and refurbish, or even buy currently unmortgageable properties. This gives you an excellent opportunity to add value to your portfolio, meaning you may well be able to borrow what you originally paid for the property. Many investors are increasingly using this method to build their portfolios quickly, meaning they no longer have to save up a new deposit every time they want to buy a new property.
Of course every person and every portfolio is different so there is no method that is perfect for everybody. At ABC Finance we have a team of experienced specialist finance experts on hand and ready to offer you no obligation advice based on your circumstances. For more information, please enquire here or call us on 0800 088 6008.