Property Trading

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Property Trading

Funding for property trading is more specialised that getting a loan through a trading bank.

Property traders make their money by buying a property at a price which allows them to make a profit by selling it for a higher price – normally after a relatively short period of time.

Trading banks make their money by holding a loan for (hopefully) a long period of time. The small margin they make between what they can purchase funds for to on-lend to customers makes money for them over time.

Funders for property traders however know that they are only going to have their funds lent out for a short period of time so cannot rely on the interest rate margin to make them a profit. For these reasons they charge an upfront fee and a higher interest rate.

These funders also take more of a risk in that the borrower normally does not have the ability to service the debt. The funders rely on a “take-out” for the deal they are funding – for example, if you can purchase a property with a long settlement – and secure an on-sale of that property – then these types of funders would lend based on the guarantee of getting their money back once the property is sold. If you had a loan offer from a standard trading bank – once certain conditions have been met over the period of alternate funding – then this is also seen as a “take-out” for this type of funder.

Times you would seek “property trade”/alternate funding:

  1. When purchasing and on-selling a property within a short period of time.
  2. When purchasing a property that doesn’t fit with a trading bank immediately.
  3. There are past loan payment or credit issues which need to be sorted out over 6 months to take back to a trading bank.
  4. You purchase a property cheaply with a good valuation and you want to have the bank rely on the valuation and not the purchase price.
  5. You are purchasing a non-traditional property which needs modifications before a bank will accept it.

There are good commercial, as well as practical, reasons to use property/alternate funding. This type of funding is often only available through brokers like us who have experience and contacts in this area.

Why Use a Mortgage Broker?

Because we can save you time and money

We can even get you that dream home that you might otherwise miss out on. Or enable that development project to build your business.

Find out more about why you should use a Mortgage Broker or just get in touch.

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