Bridging finance is an excellent option when you need to raise funds for a property project, but the loan isn’t low-risk enough for a conventional mortgage.
These loans are short-term products that you can use for pretty much anything, either as a business or an individual. Examples of common bridge loan purposes include:
- Buying a home in need of renovation.
- Financing a business investment.
- Purchasing land to develop.
Here, the Revolution Brokers team explains a bridge to let mortgage product and why you might consider this alternative type of loan.
If you’d like to learn more about bridge to let borrowing or get a new application started, please get in touch at info@revolutionbrokers.co.uk or give us a ring at 0330 304 3040.
Bridge to Let Mortgages Explained
A bridge to let loan is a product designed for buy to let rental investments. In essence, an investor can buy any property that wouldn’t qualify for a typical mortgage.
The exit strategy to repay the loan is usually an agreement in principle on a standard buy to let mortgage once work has been carried out to make the property easier to finance.
There are lots of circumstances where a bridge to let mortgage might be suitable:
- Waiting for an existing property to sell but needing to move quickly on an investment opportunity.
- Financing a purchase at auction – most lots require full payment within 28 days, which isn’t achievable on a typical buy to let mortgage.
- Using bridging finance for a property renovation project.
- Repaying tax bills (this is permitted through bridge finance, but not possible through most other borrowing products)
When applying for a bridge to let loan, the essential element is demonstrating how you plan to repay the debt – this is called your exit strategy.
Benefits of Bridge to Let Finance
As we’ve seen, bridge to let loans are incredibly flexible and have very few restrictions in place.
There are several compelling benefits to using this financing option when a standard mortgage isn’t possible:
- Exit finance pre-approval: if you want to invest in a property that doesn’t qualify for a conventional mortgage, bridge loans can be invaluable. You can often secure pre-approval for your remortgage exit plan from the same lender rather than leaving this to chance.
- Fast completion: bridge loans can be completed and underwritten in a matter of days, and the funds will be available considerably quicker than any mortgage product.
- Excellent flexibility: you can use a bridge to let loan to complete a payment for an auction property within the 28-day deadline, so you don’t risk losing the property or forfeiting your deposit.
Bridge to let is also a great solution if you’re midway through a purchase but experience a frustrating break in the property chain.
Many buyers miss out on an exciting investment prospect because they need to wait until an existing home or another property in their rental portfolio has sold to raise the required funds.
Bridging loan broker allow you to complete a purchase while another asset is on the market, provided the investment is affordable, and you have a viable exit strategy.
Bridge to Let Finance for Uninhabitable Properties
Mortgages are only available on habitable homes. That usually means they need to have at least basic kitchen and bathroom facilities and be watertight.
Dilapidated properties can make for a good investment project, usually sold for a fraction of their eventual market value.
Developers can use a bridge to let to purchase a renovation project, cover the cost of the repair works, and then sell the property or refinance on a standard buy to let mortgage to repay the bridging loan.
Exit Strategies for Bridge to Let Loans
One of the significant advantages of a bridge to let agreement is that you’ll usually agree on the exit strategy with your lender at the time of the initial application.
That means you can cut down on time required (and any lender fees) by applying for an agreement in principle on your refinance solution simultaneously when applying for the bridging loan.
For lenders, it’s a secure solution since they don’t have to conduct any assessments on the viability of your exit strategy since they’ve already managed due diligence checks when approving the mortgage agreement in principle.
You can also use a bridging loan from one lender and refinance on a buy to let broker with another. Still, it’s a more complex transaction to organise, and you’ll need to provide all the information to both lending providers.
Please get in touch with the Revolution Brokers team to explore your bridge to let requirements, and structure a streamlined transaction to allow your next property investment project to proceed smoothly.
Our team is available on 0330 304 3040 or via email at info@revolutionbrokers.co.uk.
