According to recent reports UK house prices have fallen by up to 70 per cent, so it’s hardly surprising that people are turning to overseas markets for investment opportunities.
Investors face a difficult decision with regards to funding foreign investment purchases. Do they wait for a mortgage deal to be completed or seek a short-term option such as a bridging loan to cancel out the risk of losing the property to competitors?
Approaching short-term lenders to bridge the finance gap whilst waiting for a mortgage to be processed, is becoming an increasingly favourable option for those looking to snap up property abroad.
Chris Baguley, Managing Director of Bridging Finance told the Telegraph: “The key to securing a good deal is acting quickly when you see a property you like and have done your research.
“We complement the banks by providing a short-term stopgap funding while they do their long-term due diligence. The fact that there is now more competition for the same properties means that it is often down to whoever moves fastest.
“Sometimes our clients have offered less than the asking price, yet still had their offers accepted because the vendor knows they can complete in days as opposed to two or three months.”
Bridging loans could be used to stop a property deal falling through, and enable investors to buy property quickly. Some commentators believe that although property markets abroad are improving, the highest numbers of properties are expected to hit the market in the coming three months.
Some have warned of the risks associated with using a short term finance option to bridge the gap, especially if the mortgage cannot be acquired quickly enough. Although there have been reports that lending is improving, many mortgage lenders are still reducing their finance and pulling out of deals, heightening the risk of using a short term loan facility.
Simon Gammon, managing partner of Knight Frank Finance, told the Telegraph: “Interest rates are still very low, and this is why there haven’t been many repossessions, despite everyone going through tough economic times.
“Once rates go up, and it is a question of when not if, more people will start to find mortgage repayments harder. That’s when more and more holiday homes come on to the market and prices go down even further."
As growing numbers of residential, and often inexperienced, investors turn to bridging loans for quick and 'easy' finance, experts from within the sector are urging caution and attempting to inform the public that whilst short term loans can provide the best solution in many instances, they also require the borrower to have a clear exit.
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