Developers and investors in the UK property market risk losing over £1 million by neglecting to compare lenders for bridging finance, commercial mortgages, and development finance. A recent analysis highlights significant discrepancies in loan offers, underscoring the importance of thorough research in securing optimal financing.
How Much Can You Save by Comparing Bridging Finance Lenders?
According to a recent study, the differences in offers among lenders can be staggering. For instance, when looking at bridging loans for a £1.4 million purchase, the offers ranged from £646,106 to £979,265, creating a £333,159 gap. This variance represents a 52% difference in what lenders are willing to advance. In commercial mortgages, a similar pattern emerged, with offers for a £1.5 million retail purchase in the North West varying from £750,000 to £1.125 million, a £375,000 difference that could significantly reduce the deposit required.
What Are the Implications for Development Finance?
The analysis revealed the largest discrepancies in development finance, particularly for a £3.7 million project with a gross development value of £5.2 million. The offers varied by £842,000, indicating that a more competitive lender could provide £3,371,262 compared to just £2,340,936 from the least competitive option. This difference not only affects immediate financing but also impacts the return on capital employed, with a 94% increase expected from securing the larger facility.
What This Means for Investors in Bridging Finance
For investors, the implications of these findings are profound. By securing the most competitive loan terms, an investor with £1.4 million of equity could potentially spread their capital across three projects instead of tying it all into one. Over a career, this could lead to completing 30 projects instead of just 10. The ability to access better financing options can significantly enhance an investor’s portfolio and overall returns.
Why Are Many Borrowers Not Comparing Bridging Finance Lenders?
Despite the potential savings, many borrowers and brokers still rely on a limited number of lenders, often sticking to traditional methods. Ian Humphreys, CEO of Brickflow, notes that this approach is common in the industry, but it overlooks the advantages technology offers in comparing multiple lenders efficiently. By embracing technology, borrowers can make more informed decisions and secure the best possible financing.
Frequently Asked Questions
Why is comparing lenders important for bridging finance?
Comparing lenders is important for bridging finance as it can lead to significant savings on loan amounts, deposit requirements, and overall project costs.
How can I compare bridging finance offers effectively?
Utilising specialist property finance comparison platforms can help you evaluate multiple lenders’ offers, ensuring you secure the best terms available. For more information, check our bridging finance guide.