Finance Options for Property Investors: What You Need to Know

Investing in property can be a rewarding way to build wealth, but securing the right finance is crucial to maximising your returns and managing risk. Whether you’re a first-time investor or expanding an existing portfolio, understanding the various finance options available will help you make informed decisions. Let’s explore some of the property finance options for investors, including their benefits and when they’re most suitable.

1. Buy-to-Let Mortgages

Buy-to-let (BTL) mortgages are specifically designed for properties that you intend to rent out. Unlike residential mortgages, BTL mortgages are assessed based on the potential rental income rather than your personal income.

Key features:

• Higher interest rates than residential mortgages
• Typically require a deposit of 20% – 40%
• Interest-only repayment options available
• Lender affordability checks based on rental income

Best for:
First-time landlords and experienced investors looking to generate rental income.

2. Bridging Loans

Bridging loans provide short-term finance, typically up to 12–24 months, to cover the purchase or renovation of a property. These loans are ideal for investors who need fast funding to secure a deal or complete a project before refinancing.

Key features:

• Quick approval and release of funds
• Higher interest rates due to the short-term nature
• Interest can be rolled up or paid monthly
• Can be secured against residential, commercial, or mixed-use properties

Best for:
Auction purchases, property refurbishments, and chain breaks

3. Development Finance

Development finance is tailored for larger-scale property projects, such as building new homes or converting existing properties. Funding is typically provided in stages as the project progresses.

Key features:

• Up to 70% of Loan to Gross Development Value (LTGDV)
• Interest rates based on project risk and experience of the developer
• Funds released in tranches based on build progress
• Exit strategy (such as sale or refinance) required

Best for:
Large-scale developments, property conversions, and multi-unit projects

4. Commercial Mortgages

Commercial mortgages are used to finance properties that will be used for business purposes, such as offices, retail units, or mixed-use developments. These can also be used for residential portfolios held in a limited company.

Key features:

• Loan terms up to 30 years
• Fixed or variable interest rates
• Can cover up to 75% loan-to-value (LTV)
• Affordability assessed based on rental yield and business income

Best for:
Long-term investment in commercial or mixed-use properties

5. Mezzanine Finance

Mezzanine finance is a hybrid of debt and equity funding, often used to top up development finance when the loan-to-value (LTV) from the main lender isn’t enough. It sits behind the senior lender in repayment priority.

Key features:

• Higher interest rates due to increased risk
• 100% funding available
• Typically secured by a second charge on the property
• Repayment from project sale or refinance

Best for:
Experienced developers looking to minimise capital outlay

6. Second Charge Loans

Second charge loans are secured against a property that already has a mortgage. They allow investors to release equity for further investments or property improvements without remortgaging.

Key features:

• Higher interest rates than first-charge loans
• Loan size based on available equity and affordability
• Can be used for property improvements or portfolio expansion

Best for:
Releasing funds for further investment without disturbing existing mortgages

How We Can Help

At Pure Property Finance, we specialise in helping property investors find the right funding solution for their projects. Whether you’re looking for a buy-to-let mortgage, bridging loan, or complex development finance, we have access to a wide range of products and our expert team can guide you through the options, helping you secure the best rates and terms for your investment.

Get in touch today to discuss your property finance needs on 02920 766 565 or [email protected].