Find investment property finance

The UK commercial real estate market saw over £10 billion in investments in the fourth quarter of 2023 and reached a transaction volume of over £43 billion across the year. With so much market activity, it’s no surprise some businesses are interested in finding out more about how they can power their property investment projects with financial solutions.

Property investment finance has become a cornerstone tool for property developers, private real estate investors, and even first time landlords.

But given almost 100,000 mortgages were in arrears in Q1 2024 and missed payments and defaults can cause sleepless nights and cripple a project, it’s important to empower yourself with the facts when deciding how you’re going to finance your next property. Here are some of those facts. 

What is investment property finance?

Investment property finance exists to support businesses and individuals in acquiring or enhancing properties with the intention of making some form of revenue from that property, whether that’s in renting or selling the premises.

The property investment must usually be a commercial one, rather than a personal one. For example, buying a plot of land and building six apartments on it with the intention of selling them would be a suitable reason for attaining property investment finance, but buying a personal home with the intention of selling it in twenty years and making a profit from the increase in property value would likely be more suited to a residential mortgage.

Seven types of investment property finance to consider

Finance comes in all shapes and sizes, here are a few of the types of investment property financial solutions available to investors:

• Auction finance: Auction finance is designed to support purchases made at auction. It addresses the challenge of needing to pay for the property quickly, often before a traditional mortgage can be secured.

• Bridging loans: Bridging loans are short term financing solutions (lasting up to around 12-24 months) designed to bridge the gap between buying a property and securing further funding, for example, in the form of a sale.

• Commercial mortgages: Commercial mortgages provide long term funding to pay for a property for business use. They are usually paid back over several years and tend to come with lower interest rates when compared to short term financing.

• Property development finance: Property development finance helps support renovation projects.

• Buy-to-let mortgages: Both limited companies and personal investors can leverage buy-to-let mortgages to support their rent generated income projects.

• Fixed rate mortgages: A fixed rate mortgage keeps interest at a stable level and you usually need to repay the loan over the course of the term.

• Interest only mortgages: On the other hand, you only need to repay the interest with an interest only mortgage (and possibly admin fees, broker fees etc), but the interest will usually be higher and you will need to repay the entire loan at the end of the term.

Example: Let’s say you stumble upon the perfect property at auction, but you don’t have the £200,000 required to complete the sale on the day. It’s exactly what you were looking for to build out your rental portfolio but you’d need to apply for a buy-to-let mortgage to fund it. That would take time. In this case, you might like to consider auction finance to help you bridge the gap between hearing the word “sold” and getting approval for a mortgage from your bank.

How to apply for an investment property loan

Application processes vary depending on the specific loan, but here are some steps you may take when applying for an investment property loan:

• Compare offers: The first step is finding a selection of financing solutions you’d like to apply for. If you’re eligible, leveraging a broker like Funding Options by Tide can speed this step up by offering you a look at several offerings in one central place.

• Confirm eligibility: Each lender will have their own eligibility criteria, but usually, your business, investment, or address will usually need to be UK-based and you’ll likely need to be over 18 years old. You may also need to demonstrate that you can afford the loan, and it’s possible you’ll need a deposit of some sort, usually amounting to around 25% of the cost of the property.

• Gather documents: To ensure you’re ready when you hit apply, gather together your documents now. You may need your company documents, a business plan, and details on the property. You might also be asked for cash flow projections.

• Submit your application: Send all of those documents over and hit apply. You may then need to wait to hear back from the lender. Don’t be afraid to follow up or ask questions.

Benefits of investment property financing

Due to the inbuilt collateral in the form of property, investment property finance can, in some cases, be easier to get approved for and can even come with lower interest rates when compared to unsecured loans. For example, getting a £200,000 loan by leveraging a £300,000 property as security would generally be easier than getting a credit card with a £200,000 limit and no collateral.

Also, considering the wide range of investment property financing solutions available, there’s a good amount of flexibility. Looking for a short term loan that you’d like to repay when you sell a property in one year? Consider a bridging loan. Want to find something more long term that you can repay slowly over the years? Take a look at commercial mortgages.

Risks of investment property financing

While the ability to access high amounts of funding can be a benefit, if mismanaged, it can also present a big risk. Make sure you’re not overexerting yourself. Carefully consider if you can truly repay the loan and run a few mental simulations on what you’d do if your circumstances change – could you still meet your repayments? If you default, the impact to your business credit score and possibly even personal credit score could be severe. Make sure you enter any financial agreements armed with all the facts.

Legal considerations for borrowers

Carefully consider all legal documents before signing. Take a look at the deposit amount, interest rates, and any additional fees (like admin or legal fees) you may be charged. Make sure you understand what will happen if you miss any payments or default.

What’s trending in investment property finance?

With the rise in fintech, finance in general is experiencing a lot of change. Here’s what’s shifting in investment property finance:

• Online brokerages like Funding Options by Tide are making it easier for borrowers to find and apply for property finance

• Open banking is helping improve the document submission process and making the loan approval process a little easier for both borrowers and lenders

• AI is improving the underwriting and risk assessment process by enabling lenders to process large amounts of data

• Challenger lenders are helping diversify the available finance options

Apply for investment property finance with Funding Options by Tide

We help connect borrowers to our network of over 120 lenders offering between £1000 and £20M. Just fill in the information below to find out how much you could be eligible to borrow.

Apply for investment property finance

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.