Alternative Finance Products for Property Purchase
The UK’s’slternative finance industry is worth £4.6 billion, yet the majority of British property buyers are not aware of the many property purchasing options available to them. The majority of property buyers since 2007 have purchased their properties either through cash or mortgages. A survey carried out by the bridging lender has evidenced a lack of understanding or knowledge of 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 five homeowners has confirmed having used alternative finance such as unregulated loans, crowdfunding, and mezzanine finance towards the purchase of properties. Only 13% have used bridging finance, and this increases to 21% of second home buyers.
Due to the many options available in the market for finance or people’s lack of understanding or knowledge of 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 of 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 of or had a strong understanding of bridging loans or the situations in which these loans could be used.
The past decade has seen a rise in alternative finance options available to buyers or better suited to their needs, yet research demonstrates a lack of awareness or 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 ability of 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 they invest.