Property development finance means all kinds of finance options for property entrepreneurs. As developing both commercial and residential properties involve a huge expense, most developers look for funding sources. There are property development finance companies that help them take the first big step in the real estate market. If you are interested in becoming a property developer, these are your property development finance options:
High street mortgage- This type of mortgage is ideal for properties where you will be residing until you complete the work. So, it doesn’t apply for properties that you want to rent or uninhabitable properties. Before giving the money, the lender analyses your ability to repay as well as the worth of the property you are purchasing.
Commercial mortgage- The only difference between a high street mortgage and a commercial mortgage is that your loan will be sanctioned only if the property is commercial. Shops, offices, and factories are common examples of commercial properties. If you want to invest in commercial properties, there are several property investment companies in South Africa. While giving this type of loans, the lender doesn’t care about your personal income. You will have to show your business assets and income to prove your eligibility for getting the loan.
Second charge mortgage- Second charge loans are basically top-ups of your present location. To increase the value of a property, you can consider a second charge mortgage. These are secured depending on the property’s value. It isn’t mandatory for you to live in the property to get the loan.
Buy-to-let mortgage- Property developers follow two basic routes: refurbishing properties to sell them or purchasing properties to multiply income by renting them. If you intend on renting a property, you will have to opt for a buy-to-let mortgage.
Commercial bridging loan- A commercial bridging loan is recommended to bridge the gap when renovating or buying a commercial property. For this, at least 40% of the property’s value should come from one or more commercial means. An instance of such a building is a shop with an apartment above. You can also use this type of funding to fund your small business’s expansion.
Residential bridging loan- Property developers often require residential bridging loans as these loans are adaptable for a variety of situations. They are interest-only, short-term, and you can secure them at a relatively short notice. Developers mostly use this finance option while selling and buying properties, during refurbishment work and auctions. They bridge the gap between multiple mainstream lending plans.
Conclusion
Whether you are buying a commercial property for the first time or thinking of diversifying your property portfolio, there are excellent property investment opportunities in South Africa. So, explore your options and find a reputed property finance company in your city.