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HomeBuy to LetBridge-to-let mortgage

Bridge-to-let mortgage

Last updated on 20th December 2023 by Martin Alexander

If you’re purchasing a buy-to-let property that needs refurbishment, you may benefit from using a bridge-to-let mortgage. The world of buy-to-let is full of financial options to help you with your investments. There’s a lot more than regular mortgages to choose from, as each type of loan suits specific investment strategies better than others.

Key features of bridge-to-let loans include:

  • Fixed terms for 1-3 years
  • Shorter terms available
  • Open and closed bridging options
  • Minimum loans from £25,000 (dependent on the lender)
  • Approval within 24-48 hours
  • Available on any property type

This guide will cover everything you need to know about bridging loans for buy-to-let property. Our advisors are also available to answer any questions.

What is a bridge-to-let mortgage?

Bridge-to-let is a bridging loan used for buy-to-let property that requires refurbishment or further building works. Bridging is suitable for properties that don’t qualify for a mortgage, which can be a convenient source of capital when needed.

Most mortgage lenders will refuse a buy-to-let mortgage on rundown properties. This is because lenders want adequate security for the mortgage. An uninhabitable property doesn’t offer lenders enough security for a mortgage. For instance, if a property doesn’t have a useable bathroom or kitchen, it will be very difficult to get a mortgage.

Buy-to-let lenders prefer properties ready to let out and don’t require extensive refurbishment. As a result, an uninhabitable property would be ideal for bridging finance.

Bridge-to-let mortgages can provide you with the funds to spend on the refurbishment of your buy-to-let property. Once the property has undergone a complete renovation, you should be able to get a regular buy-to-let mortgage. In doing so, you can repay your bridging lender.

When should I use a bridge-to-let mortgage?

Bridging loans for buy-to-let can be used in several scenarios, such as:

  • When you’re unable to get a buy-to-let mortgage on a property
  • If the property requires renovation but you’re short on funds
  • Buying a property at auction
  • You don’t want a mortgage
  • Capital is tied up elsewhere
  • You’re adding value to your buy-to-let
  • HMO conversion
  • Commercial buy-to-let

There may be other reasons you’d need a loan for your buy-to-let. That being said, the ultimate reason is to raise capital. Bridging loans usually have a maximum timeframe of one year before they need to be repaid. Some lenders are flexible on timeframes, so if this is required, get in touch.

What rates can I expect?

Bridge-to-let rates are typically between 0.4-1% per month. Most bridging lenders will also only offer loans at 75% LTV. You may be able to get a higher LTV, such as 85%, but rates will be a lot higher than average. Interest rates start to reduce with larger deposits.

Each lender is different and may charge fees in addition to the interest on the loan. You’ll have to calculate the projected figures for your investment to ensure this type of finance is viable.

For instance, if you’re buying a property at a discount due to its condition, consult an estate agent on how much it will be worth once refurbished. This will give you a good indication of what fees and rates suit your project.

Lenders will value your buy-to-let property with a selected surveyor. Nonetheless, it’s a good idea to check the numbers before committing.

How can I get the best rates?

To get the best rates, compare what each lender will offer. After all, buy-to-let is an investment, so you should keep the numbers in mind, as you don’t want to overpay.

Our advisors can check each lender you’re eligible with to find you the most competitive deal available. This can save you money and time so that you can focus on other aspects of your investment.

Will I need an exit plan to repay the loan?

You will need a clear exit strategy for repaying the loan, and lenders will also need details of this. For instance, your lender will want to know the potential market value of your buy-to-let once it’s been refurbished. This will indicate whether your proposition is suitable.

Bridging to let typically has one exit strategy, which is to get a buy-to-let mortgage once refurbished. This should allow you to release capital from the property to repay your bridging loan in full. The main benefit is that you’ll have an investment property that should generate a monthly rental income once you’ve found tenants.

If your exit plan is to sell the property, you’ll need a buy-to-sell mortgage rather than a bridging loan. This is because a bridge-to-let loan is specifically designed for letting rather than selling.

Read more: What is a buy to sell mortgage?

Advice from bridge-to-let brokers

Although bridge-to-let finance is geared around buy-to-let, there’s still much to consider before deciding on the correct type of loan. Purchasing a buy-to-let that’s not in good condition is risky, but you can minimise this risk by having the right funding in place. Getting it wrong could leave you with a substandard investment that could become a financial liability.

Our advisors specialise in all types of buy-to-let finance, including bridge-to-let. Once we understand your buy-to-let goals and financial situation, we can advise you on your best options.

Our advisors can compare each deal to calculate what’s best. Furthermore, you’ll be confident you’ve got the best financial arrangement for your investment. Our experts can help, call 0800 195 0490 for further information.

About the author

Martin Alexander
Senior Mortgage Advisor

Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.