Can Bridging Loans Ease the Stamp Duty Pain for Landlords?
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Can Bridging Loans Ease the Stamp Duty Pain for Landlords?

Clock  3 minute read

Carl Shave Carl Shave | June 21, 2016

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Ever since it was announced there would be an additional 3% stamp duty surcharge for second homebuyers to contend with, landlords have been searching for a way to ease the pain of this price hike. In March this year, there was a dramatic surge in the number of buy-to-let loans agreed, as landlords raced to beat the stamp duty surcharge & many were present with the dilemma, to sell or not sell before the change? This was replicated by the interest in bridging loans, a popular finance option for landlords and homeowners looking to secure finance quickly. Since then, the dust has settled somewhat, but the increased interest in bridging loans has remained. Why? Experts think this is due to the important role bridging loans could now have in helping landlords and homeowners come to terms with inflated stamp duty prices.

How Could Bridging Loans Help?

As of 1st April 2016, an additional 3% stamp duty was added to the price of properties bought by those who already own a home. This can cause problems for those who are buying a new home but are unable to sell their first home before the purchase takes place. In this case, the buyer will be required to pay the additional stamp duty surcharge. Although the additional stamp duty premium will apply to the purchase, it will be refunded by HMRC if the first home sells within three years of the purchase of the second property. For buyers who are unable to afford the stamp duty hike, a bridging loan could provide the extra capital they need to complete the transaction. One of the biggest benefits of bridging loans is their versatility. In this instance, as long as the loan can be secured against a property, the money could be used to cover the cost of the extra stamp duty on the second property. The exit strategy would then be the sale of the first property.

Demand for Bridging Loans on the Rise

Figures for the number of bridging loans agreed in the first quarter (Q1) of 2016 show a 3.4% rise on the final quarter (Q4) of 2015, and a 56% increase when compared to the same period last year. There has also been a steady rise in search traffic for bridging loans from April this year. For the fourth consecutive quarter, mortgage delays were the most popular reason for accessing a bridging loan, accounting for 42% of all lending in Q1 2016. Refurbishment was the second most common reason, with 21% of bridging loans providing the capital landlords and homeowners need to make improvements to their properties. If you think a bridging loan could be the fast, versatile product you need to complete a property purchase, please get in touch with the Just Mortgage Brokers team today.

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