A Solution when Buying to Add Value ??

Hello! Steve again!

In this climate especially, we are seeing more clients buying property to sell on and make a profit. Many have day jobs outside of this.?

Because it's important to have more than one exit strategy, having the option to rent the property out makes sense too.?

So, this week is for those looking to add value to properties that need more than a lick a paint.?

With lenders getting stricter over the energy efficiency and condition of properties before they put a mortgage on it, without having to pay cash, how do you buy that rundown property with the certainty of being able to switch to a mortgage afterwards as a fall back in case it doesn’t sell quickly?

The answer could be Bridge To Let...

So what is Bridge To Let?

At its most simple, Bridge To Let Finance refers to bridging loans that fund the initial purchase of rental properties – usually those requiring refurbishment or further works. It can be a convenient and cost effective option for clients taking on a new project. The idea is an almost seamless transition from the specialist funding – the bridging loan – needed to secure a property ineligible for a standard mortgage, to its exit onto Buy To Let (BTL) finance.?

When is Bridge To Let a good choice??

Unlike traditional mortgages, which can take months to arrange, bridging finance is short-term and can be processed in a matter of days or weeks.

Generally speaking, bridging loans exist – as you might expect – to bridge a gap in financing. The classic example for homeowners is when a borrower is caught in a chain but needs immediate access to funds to secure their next property.

They can also be the solution when you want to purchase a property that is not currently eligible for a regular mortgage (e.g. when the property is lacking an essential element such as a kitchen or bathroom or even just an old property failing today’s?EPC or Energy Performance Certificate rating).?

In a BTL scenario, a bridging loan is most likely needed when a rental property requires some refurbishment or development before it is fit for letting.

As well as the speed they offer, bridging loans tend to be a highly flexible source of finance and many lenders will take a case-by-case approach to their underwriting. In short they can allow developers, landlords and clients in general to seize opportunities that high street lenders don’t currently offer. With a Bridge to Let loan, this is coupled with the security of having your longer term plan in place from the start.

With a Bridge to Let loan, you may or may not be tied in to moving on to BTL?finance from the same provider, and borrowers will consider the pros and cons of locking in their exit versus keeping their options open to pick the best offer available at the time.

Rates and terms

Though some Bridge to Let products will include both the bridging element and BTL finance as a single “package”, this is not always the case, so when calculating rates and terms, the bridging and BTL elements are always handled separately. Of course, rates and terms vary from lender to lender, but the majority of Bridge to Let?lenders offer funding of up to around 75% LTV, although 85% LTV is possible.?

Are you eligible?

Different lenders will have different eligibility criteria – a key example being whether or not they will offer Bridge to Let mortgages to first time landlords/developers. Some will have standard criteria, while others will take a case-by-case approach, usually based upon the nature of the project and/or the level of renovation required.

Other factors lenders will assess – in addition to a number of those you’d expect in a standard mortgage application – are likely to include: the current condition of the property, your plans for its refurbishment/development, the extent of work to be undertaken.

At Express Mortgages we have experts in different fields and even have a department dedicated to Specialist Finance such as this.?

Many clients we deal with have built portfolios this way and some regularly purchase one or two properties a year to renovate and sell on. Whatever your motivation, get in touch here to speak with an expert.?

Have a fantastic week!

Steve

Express Mortgages is a trade name of Express Mortgage Services Ltd. Express Mortgage Services Ltd is authorised and regulated by the Financial Conduct Authority. [Reg No: 474427] Company registered in England & Wales no. 05167662

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