Recent findings highlight a significant risk for developers and investors in the property sector: failing to compare bridging finance options can tie up over £1 million in unnecessary costs. This oversight comes from a lack of thorough lender comparison, which can lead to substantial financial discrepancies in borrowing scenarios.
How Much Can You Save by Comparing Bridging Finance Lenders?
A recent analysis of 300 simulated searches for bridging loans, commercial mortgages, and development finance revealed staggering differences in lender offers. For instance, bridging loans for a £1.4 million property showed an average variance of £250,000, while commercial mortgages on a £1.5 million purchase had an average gap of £306,000. The most alarming figure was found in development finance, where offers on a £3.7 million project varied by £842,000. This indicates that a simple comparison could lead to significant savings.
What Are the Implications of Bridging Finance for Investors?
For investors, the implications of not comparing bridging finance options are profound. In one example, offers for a £3.7 million development project ranged from £2,340,936 to £3,371,262, representing a difference of £1,030,326. Securing the more competitive offer could yield a 94% higher return on capital employed. This means that an investor with £1.4 million of equity could potentially spread their capital across multiple projects rather than committing it all to a single one, allowing for greater diversification and potential returns.
What This Means for Borrowers and Brokers in Bridging Finance
For borrowers and brokers, the findings underscore the importance of using technology in the lending process. Ian Humphreys, chief executive of Brickflow, points out that many in the industry still rely on a limited number of lenders, which can lead to missed opportunities. By expanding their search and utilising comparison tools, borrowers can secure better terms and reduce their financial commitments significantly. For more insights, check out our bridging finance guide.
Frequently Asked Questions
Why is it important to compare bridging finance options?
Comparing bridging finance options can lead to significant savings, as differences in lender offers can exceed £1 million, affecting overall project viability and returns.
How can I effectively compare lenders for bridging finance?
Utilising specialist property finance comparison platforms can help you assess various lenders and their offers, ensuring you secure the most competitive terms available. For current rates, visit bridging loan rates.