Alternative Finance Products for Property Purchase
UK’s alternative finance industry is worth £4.6billion yet majority of British property buyers are not aware of the many property purchasing options available to them. The majority of the property buyers since 2007 have purchased their properties either through cash or mortgages. Survey carried out by the bridging lender has evidenced that there is a lack of understanding or knowledge on alternative finance options available in the market.
Since 2007, 42% of properties sold have been to cash buyers and 52% have used mortgages or remortgages. One in 5 homeowners have confirmed having used alternative finance such as unregulated loans, crowdfunding and mezzanine finance towards purchase of properties. Only 13% have used bridging finance and this increases to 21% second home buyers.
Due to the many options available in the market for finance or peoples lack of understanding or knowledge on these products, many home buyers have relied on a broker to help them find a financial product best suited to their needs. The lack of knowledge or understanding around other financial options has meant much reliance on mortgages and cash purchases. Research suggested that the buyers would have liked to have considered other financial products but feared that they might lose the property if they delayed making a credit decision. Nearly 50% of the researched group were not aware or have a strong understanding of bridging loans or the situation in which these loans can be used.
The past decade has seen a rise in alternative finance options available to the buyers or be better suited to their needs yet research demonstrates the lack of awareness/ understanding about what these options are and how to use them.
It is important that buyers are aware of the financial products available to them so that they can make better informed choices placing them in a better position to purchase a property quickly and efficiently. There are many alternative finance options in the market and to remain reliant on mortgages is restricting the clients to get the funds they need.
This industry has seen prices become very competitive due to the entry of new specialised lenders so it is ever more important to educate people on what’s available in the market so that they can make an informed decision before the invest.