What are my options for financing an investment property? 

Whether you’re considering buying your first buy-to-let, expanding your property portfolio, or embarking on a property development, the right finance is crucial to making your investment a success.

However, property investment finance isn’t a one-size-fits-all solution. The right type of funding will depend on your circumstances, the kind of property, and your long-term strategy. In this blog, we’ll outline the main options for financing an investment property and what you should consider before deciding.

Commercial mortgage

If your investment property is commercial, such as an office, retail unit, warehouse, or mixed-use building, a commercial mortgage might be the appropriate choice. A commercial mortgage is similar to a residential one but is designed for commercial assets.

Pros

• Long-term finance solution for commercial investments
• Ability to borrow significant sums
• Can support owner-occupied or investment properties

Cons

• Longer and more complex application process
• Larger deposits and stricter eligibility checks than for residential mortgages
• Valuation of commercial property can be more complex

Commercial mortgages are a good choice if you want to hold a property as a long-term investment or run your business from the premises.

Bridging loan

If you’re seeking quick, short-term funding for your property investment, a bridging loan is an option. A bridging loan can “bridge” the gap while you arrange longer-term finance or sell another asset. This type of finance is particularly beneficial when purchasing property at auction, and completion deadlines are tight.

Pros

• Fast access to funds
• Useful for auction purchases or short-term opportunities
• Can be repaid once long-term finance is secured

Cons

• Higher interest rates compared to other types of finance
• Short repayment terms
• Require a clear exit strategy to prevent costs from escalating
• Bridging loans work well when speed is essential and there’s a clear plan for repayment, such as refinancing or selling the property.

Development finance

If your investment involves building, refurbishing, or converting property, development finance could be the most suitable option. This type of funding is designed to provide staged drawdowns as the project progresses, and can be used for land acquisition and construction costs.

Pros

• Tailored for construction and development projects
• Funds released in stages to align with project needs
• Can cover both land purchase and building costs

Cons

• Requires detailed planning and projections
• Lenders often require evidence of property development experience
• More complex to arrange than standard loans

Development finance is a specialised product that can unlock opportunities for both experienced property developers and first-timers.

Buy-to-let mortgage

If you’re considering buying a residential property to rent out, a buy-to-let mortgage is one of the most common types of finance. These mortgages are designed specifically for landlords and are based on the rental income potential of the property, rather than on your personal income.

Pros

• Tailored for rental properties
• Lenders assess affordability based on rental yield
• Long-term financing option

Cons

• Larger deposit usually required (often 25% or more)
• Higher interest rates than standard residential mortgages
• Strict criteria depending on experience and credit history

Buy-to-let mortgages are best suited for investors looking to generate steady rental income over the long term.

Unsecured business loans

In some cases, an unsecured loan can help cover costs related to investment properties, particularly for smaller expenses such as refurbishments, deposits, or professional fees.

Pros

• No collateral required
• Quick application and approval process
• Flexible use of funds

Cons

• Smaller borrowing amounts
• Higher interest rates than secured loans
• Shorter repayment terms

While not suitable for purchasing property outright, unsecured loans can be used to supplement other finance options such as raising a deposit.

Using your pension

It’s possible to invest in commercial property through a Self-Invested Personal Pension (SIPP) or Small Self-Administered Scheme (SSAS). This is a specialist area that requires financial guidance. However, it can be a tax-efficient way to invest in property, particularly if you use your pension to purchase your trading premises.

Pros

• Tax advantages
• Boosts retirement savings
• Diversifies your pension portfolio

Cons

• Strict rules apply, requiring professional guidance and administration
• Can be costly to set up and manage
• Funds tied up in a property aren’t easily accessible

Using your pension to invest in property offers a unique combination of tax benefits and long-term growth opportunities, but it comes with complexity, costs, and risks.

What to consider when choosing property investment finance

Before deciding which type of finance to pursue, think about:

• Type of property – residential, commercial, mixed-use, or development, as this will determine the available options.
• Timescale – do you need funding quickly, or are you looking for a longer-term solution?
• Your experience – lenders often look at whether you’re a first-time investor or an experienced landlord/developer.
• Affordability – lenders will scrutinise rental yields, projected sales, or business income.
• Exit strategy – particularly important for short-term finance such as bridging or development loans.

How ASC can help

We’ve been helping clients finance property investments for over 50 years. Whether you’re buying your first investment property or adding to an established portfolio, we know the lenders who can help.

We work with a broad selection of lenders, including those not available on the high street, and we clearly present your case to increase your chances of securing the right deal. Our role is to simplify the complexity, save you time, and find finance that aligns with your investment goals.

If you’re considering your next property investment, we can help you explore your options and secure funding tailored to your needs. Contact us today.