If an investor or landlord is looking to start a new project, he/she has to look at all the finance options required to complete the task at hand. However, it is crucial to make sure that the best one is chosen in order to get the best deal. A careful thought needs to be given in this regard because it is a careful decision and consideration of all aspects that will ensure you do not face any problems in the future. Below mentioned are some of the top options you can go for when you are opting for property development finance.
This mortgage is a type of property development finance that can be used to build commercial properties like offices, small shops, and large warehouses. Also, this mortgage can be used to purchase already built houses, shops, or warehouses. This is one of the simplest commercial mortgages that can be opted by an existing business that are looking to buy their own shops. A good example is a dentist who desires to buy a building on his own where he would like to practice his profession and would prefer to own the place instead of paying rent for it, since he is not able to pay for the entire property immediately. At times, it is possible to obtain 100% finance with the help of additional security. However, the person who requires the mortgage should have a solid record in trading and strong history of business operations in the same environment. It is easier to get a commercial mortgage for an existing business when compared to a startup because of the level of risk involved. This mortgage differs from a buy-to-let mortgage is the nature of the scale of operation. Overall, this mortgage is not a good fit for an individual looking for a residential property.
Finance using auction
This is a type of property development finance can be used for quicker mortgage processes. These are given out by lenders who are specialized in lending out using the process of auctions. Once a winning bid is made, the person who requires the property to pay the auction house in 28 days, which shows how fast auction financing helps in securing the right kind of funds. Finding a lender, who is a specialist in auction finance, it means that the funds will be available as soon as possible. Sometimes, these funds are available in a week’s time.
At times, some lenders provide finance options well before the person who requires the loan attends the auction. So, the person looking for a loan can come prepared with a contract.
Bridging finance or property development finance
This type of funding is a short-term funding used for helping pay building or development kind of costs. Sometimes, the bridging and development finance are interchangeable but there is still a small line of difference between the two. The main factor used to determine between a bridging or development finance depends on how heavy the project is.
How extensive is the work going to be?
To determine the amount of finance required, it is crucial to get a better understanding about the work required.
Light refurbishment – Here the changes are mostly aesthetic rather than any structural type of change. This may also involve slight work on walls, ceilings, and floors.
Heavy refurbishment or complete renovation – This usually involves removing or moving walls from one place to the other, electric works, new plumbing, adding external walls, and new rooms.
Ground-up property development finance – This is the type of property development finance that needs complete involvement. It usually starts with an empty plot of a land to completely build up property.
So, make sure that you do your homework well before opting for finance for property development and go for the best option suitable for you.