Guide to Property Finance

Introduction to Property Finance

Generally, only a handful of people or small businesses have the necessary capital to purchase property outright and therefore most people will turn to a financial institution in order to source funding.

Financing for properties, whether they are for commercial or residential use, can come in a variety of forms from everyday mortgages to short term loans, allowing investors to expand their portfolios.

There are plenty of finance options in the market that potential borrowers can turn to when they need to, this may be to: purchase new property or land, pay for renovations or to bridge the gap to offer flexibility, time and additional security between property transactions.

Throughout this guide, we’ll take a closer look at the various types of finance available and how they could help you as you venture into the world of property finance.

What is Property Finance?

Property finance is a term used when someone is looking to secure finance against a residential or commercial property.

This type of finance is often needed when an individual or business shows potential for growth but lack the required capital needed to expand and grow.

Guide to property finance agreement

Small Businesses and Semi-Professionals

This guide is aimed at smaller property investors, first-time and semi-professional landlords.

What does that mean? Simply put, for those who develop and sell, or rent properties whether it’s a secondary business alongside their daily work, or they’re starting out and building a property portfolio for business.

Whether you are a small business or individual looking to develop properties to sell or to rent, this guide will provide information on the different types of financial property options available.

What is the difference between a mortgage and a loan?

The terms ‘mortgages’ and ‘loans’ can be interchangeable when looking at the property finance market, however, they are not necessarily the same thing and therefore can be distinguished.

What is a mortgage

What is a Loan?

Loans are financial agreements between two separate parties, whereby the lender gives capital to a borrower in exchange for repayments in amounts with added interest. The borrower will agree on terms of repayment with the lender, setting up how much and how often the debt is paid back.

Loans come in different forms and can be structured differently allowing for multiple uses of finance and offer different ways of repayment. They can be used for both commercial and personal purposes and they can be secured or unsecured.

  • Secured – this is when a loan is secured against a valuable asset such as a house or other measurable asset.
  • Unsecured – loans where the borrower is not required to put up any collateral and is entirely based on a borrowers personal circumstances (i.e., their credit history, term of loan and amount required).

When looking for a suitable financial loan product, it is always best to speak to an adviser first to discuss options available.

What is a Mortgage?

A mortgage is a type of loan but is used for property purchase or refinance and will be tied to the terms of the agreement.

Mortgages are secured loans because the property is being used in the terms of the loan as collateral, and the mortgage will be registered to the title of the property.

This means if a borrower is unable to meet repayment requirements, the lender has the legal rights to take the collateral property and sell it to repay debt.