5 Tips to Financing Equity in the UK

Real estate is increasingly becoming one of the best forms of investment. This is not only because of the good returns but because of the fact that real estate cushions you from inflation. Home prices are slowly picking up the pace and it’s becoming promising as the values keep climbing in most places within the UK. There are many ways through which one can finance their equity to help maximize their returns. Nevertheless, the days when access for financing was easy and quick are long gone. The credit market is becoming tighter, making it tough for one to secure loans for investment. This means that you just have to be smart about it in order to improve your chances of success.  This having been mentioned, below are 5 tips to financing equity in the UK, with more bias on real estate equity financing.

  1. Down Payments

Especially for commercial property, down payment is one of the most important things to consider when applying for a home loan. It is also important to understand that nowadays, most mortgage insurance companies will only cover your property if you can raise a sizeable down payment (at least 20%) of your initial home loan. To qualify for better interest rates when it comes to equity financing, you may want to raise an amount higher than the minimum required down payment.

  1. Become a Strong Borrower

This means that you’ll want to check your credit score before you attempt any negotiations. Credit scores affect the interest rates, loan terms, and even the chances of getting equity financing. Before approaching a lender for equity financing, it is prudent to consider your credit score and perhaps make an effort to improve the same. As per Equifax, for instance, the credit score scale is between 0 and 700, with 420 being considered ‘good’, so make sure you rank higher than this number.  

  1. Avoid the Big Banks

Your neighborhood bank is going to be more flexible on the interest rates as opposed to the large national financial institution. The best thing about smaller banks is that they are more aware of the local market and they also have their interests in local investors. Additionally, they’ll have attractive options to ensure that you stick around. It’s however important to ensure that you check for their credibility before you append your signature onto the dotted lines whenever dealing with a less-experienced financial institution.

  1. Owner Financing

Due to the fact that the credit market has become more competitive, sometimes even more expensive for consumers, owner financing is becoming more acceptable these days. It involves dealing with a buyer/seller directly rather than having the buyer obtain a loan from a lender. Especially if you intend to sell your property at a later date, owner financing can be a great alternative as it eliminates the costs banks and other intermediaries.

  1. Creative Thinking

A home equity line of credit (HELOC) is a means through which you can easily secure financing for renovation and home improvement projects. Depending on what you specifically intend to do with the money you’re seeking, a personal loan can also be a better alternative to equity financing. Think creatively and weight your options well and consider other funding alternatives such as credit cards.

Whether you’re a property developer or just a homeowner, these tips can help improve your success chances of getting equity financing. Furthermore, there are many helpful resources online that can guide you when considering equity financing. Visit responsibleequityrelease.co.uk and find out how to ensure that your investment pays you back for the time and money you’ve invested.


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