How Do Short Term Property Loans Work?

By: Aaron Robbins0 comments

You can make the most of Australia’s current property boom with a short term property loan.

Since COVID-19, property prices have risen by an average of 18% in Sydney, 10% in Melbourne and 15% in Brisbane.

Many other parts of the country have experienced similar growth, including regional areas.

Savvy investors are capitalising on the boom by taking out short term property loans.

Read on to find out how you can too.

What is a Short Term Property Loan?

how do short term property loans work

A short term property loan lets you borrow money for business purposes using property as security.

One of the major benefits of Australia’s rising property values is that it can enable you to borrow more.

How Short are Short Term Property Loans?

Short term property loans can range anywhere for one day up to 3 years, depending on your needs.

They are ideal for when you need fast finance on flexible terms to capitalise on an opportunity.

What Can Short Term Property Loans be Used For?

Short term property finance can be used for virtually any business purpose, including:

  • Property development
  • Bridging finance to help you buy commercial property
  • Property renovations
  • Buying land
  • Refinancing
  • Buying a business
  • Building business premises
  • Working capital to help you meet your daily business cash flow needs.

What Are the Benefits of Short Term Property Loans?

short term property loan benefits

Short term property loans allow you to:

  • Get secured finance at a lower interest rate than you can get for unsecured loans.
  • Have your finance approved quicker.
  • Help you avoid missing lucrative opportunities.
  • Help you overcome any cash flow issues.

There are also some additional benefits if you get your short term property finance from a private lender.

Why You Should Use a Private Lender for Your Short Term Property Loan

Private lenders can provide you with some additional short term property finance benefits, including:

  • Faster approvals
  • Access to your funds within 24 hours.
  • More flexible repayment plans.
  • No need for a property valuation (depending on the private lender).
  • More personalised service than banks or other financial institutions.
  • No need for a credit check (because the property is the security, depending on the private lender).
  • A quick and hassle-free application process.
  • Minimal documents and paperwork (potentially only a council rates notice and drivers license is required).

Who Are Private Lenders?

Private lenders are a rapidly growing sector of the Australian lending market because of the additional benefits they provide to borrowers.

They are an alternative to banks and other mainstream lenders.

Private short term property loans are provided by either private companies or wealthy individuals.

Read The Definitive Guide: How Does Private Lending Work in 2021? to find out more.

What We Do at DFS

Diverse Funding Solutions specialises in sourcing private finance for our clients from our large panel of over 250 lenders.

Short term property loans are one of our specialist services.

We have offices in Sydney, Melbourne and Brisbane, and we arrange private loans for clients across Australia.

Our account managers understand that each of our borrowing clients and each one of our panel lenders have different needs.

We arrange a perfect match.

Each of our clients has one dedicated account manager from approval through to settlement.

Read more about Why Choose a Private Loan?

What Are Short Term Property Loan Interest Rates?

One of the best things about short term property finance is the low interest rate.

Loans secured by property are the cheapest form of finance available.

This is because they are low risk to lenders.

Further good news is that Australia’s interest rates are currently at record lows.

They are predicted to stay low for at least the next 3 years, so there has never been a better time to borrow.

At DFS, we can help you to source Australia’s lowest private lender rates through our network of over 200 lenders.

We will provide you with personalised options, not an off the shelf solution like a bank will.

Short Term Property Loan Repayments

short term property loan repayments

At DFS, we can arrange flexible repayments to suit your needs.

You can choose to make regular monthly interest repayments, or to repay your entire private loan at the end of the term (capitalised interest).

The choice is yours.

You can also choose to repay your finance early with no penalty fees.

We will match you with a private lender who can cater for your repayment needs, loan term length and other conditions.

You won’t get a tailored solution like that if you go with a mainstream lender.

How Much Can You Borrow with a Short Term Property Loan?

This depends on the private lender and the value of the property you provide as security.

Many of our DFS panel of lenders will approve loan amounts up to 80% of the underlying property’s value.

Other Short Term Property Loan FAQs

I Have a Bad Credit Rating, Can I Get a Short Term Property Loan?

Yes!

But if you know you have a bad credit score, don’t waste your time applying to a bank or mainstream lender.

They will check your credit score and either decline your application or charge you a higher interest rate.

Talk to one of our account managers at DFS instead.

Usually, we won’t even need to check your credit score.

Your property will be all the security our private lender needs to quickly  approve your finance.

How Long Does it Take to Get a Short Term Property Loan?

AT DFS, we can arrange approval and settlement of your finance within 2-3 days, depending on the lender.

Sometimes we can even arrange it the same day.

If you need your funds fast, we have ways to make it happen.

We know how important it is to get the funds you need when you need them.

Time is money, we are businesspeople ourselves so we realise how important it is to act fast.

We also know that good opportunities don’t wait, so move fast to match our clients with a suitable lender.

Why is it Getting Harder to Get a Short Term Property Loan with Banks?

Banks have stricter lending criteria than private lenders.

That’s why they reject more finance applications than private lenders do.

It’s also why their approval and settlement process takes longer, even for secured property finance.

This situation will only get worse in the future.

A crackdown on bank lending criteria for proerty finance approvals is coming in an attempt to rein in debt levels.

Private lenders won’t be affected by this crackdown.

Private loans are individually negotiated legal contracts.

They are not subject to regulatory crackdowns to restrict lending.

Each private loan is approved on its merits.

Excited Family Standing Outside New Home

Case Study – Short Term Property Loan in Sydney

Our client’s finance problem: 

A property developer in Sydney needed to secure a large parcel of prime land for their next development while still selling units in their most recently completed development.

They needed to make an offer fast.

However, their bank wasn’t prepared to lend them the amount they needed.

They wanted the developer to sell more units before they would approve any more funds.

The developer was confident he would sell the units within the next six months, but by then, the prime land he wanted for his next project would be long gone.

It was too good an opportunity to miss.

He needed short term bridging finance.

Our private lending solution: 

The developer contacted us at DHS to explain his situation.

We found a lender who could see his vision and the lucrative potential for his next project.

The developer had his 12-month short term property loan funds pre-approved within 24 hours provided the land would be used as security.

He then made a successful offer for the prime land.

The developer has just commenced work on his new development.

Case Study – Short Term Property Loan in Melbourne

Our client’s finance problem: 

Like many businesses across Australia, a Melbourne manufacturer had a lot of downtime during COVID-19 restrictions.

It was the perfect time to renovate their premises.

Unfortunately, the uncertainty around when their business would open again at full capacity led to their bank declining their renovation finance application.

Our private lending solution:

We arranged a 2-year short term property renovation loan for the manufacturer via one of our private lenders.

Repayments were tailored so that they wouldn’t need to be made for 12 months.

By that time, the business will be fully operational again and the worst of the COVID-19 restrictions will hopefully be a distant memory.

Case Study – Short Term Property Loan in Brisbane

Our client’s finance problem: 

A Brisbane business couple wanted to expand by buying new commercial premises.

Unfortunately, their credit score wasn’t as good as it should be.

This was due to some slow-paying clients.

Buying the new business would increase their cash flow, but their bank rejected their application.

Our private lending solution: 

We arranged a 3-year private loan for the client using their new premises as security.

The Bottom Line

If you need a short term property loan, get it from a private lender.

At DFS, we can help you arrange finance with a private lender on terms that will work for you and your business.

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