The Mortgage Cafe

Bridging Finance to Purchase and Renovate Unmortgageable Property


The Bridging Finance Solution

Bridging finance can be utilised to purchase, or refinance unmortgageable property. Property needing repairs and refurbishment before they can be considered habitable would normally not be acceptable security for mainstream mortgage lenders.

Bridging enables property traders to buy property requiring renovation before reselling.

Accepted Properties for Unmortgageable Properites

  • Residential Buy to Let
  • Multi-Tenant HMO
  • Mixed Use
  • Part Commercial
  • Commercial

Find the Right Bridging Loan for you

Rates from just 0.49% per Month

Bridging Finance for Property Refurbishment

Property investors and developers can utilise bridging finance to fund the purchase and renovation costs of a property.

The schedule of works may be simply to make the property mortgageable, for example, by replacing broken or inadequate kitchen and bathroom fixtures.

Once the renovations have been completed the property can be rented and remortgaged, or sold, to exit the bridging loan.

Reasons to use Bridging Finance for Property Refurbishment

  • Purchase property in poor condition
  • No rental calculation on purchase
  • Quick turnaround time
  • Funds can be secured across several properties
  • Remortgage within 6 months
  • Refinance existing bridging loan Auction purchases requiring completion within 28-day deadline

About the 6-Month Remortgage Rule

The 6-month is rule observed by virtually all buy to let lenders and is designed to protect them against artificial house price inflation as we saw in the property boom around 2003 – 2008.

In the boom, the market saw property investors buying at one price on one day and remortgage days later using a higher market value and in doing so, withdrawing the ‘equity’. This left the investor having little or no stake in the property.

While the majority of lenders enforce this 6-month rule, we do have lenders who will lend within 6 months, to exit a bridging loan for instance. Please enquire with any specific requirements.

Bridging Finance Working Example

Working example House Refurb:

Purchase price: £200,000
Loan amount 75% LTV: £150,000
Cost of works: £34,000
Refurb term: 6 months
New improved property value: £275,000
BTL mortgage amount at 85% LTV: £233,750

After 6 months from date of purchase has elapsed the property could be re-mortgaged to a buy to let term mortgage product up to 85% LTV. As you can see above, this can cover the initial purchase price and refurbishment costs.

Renovate Unmortgageable Properties Details at a Glance

  • Facilities from £25,000 to £10 million
  • 1st Charge loans
  • 2nd Charge loans
  • No ERC
  • No minimum income
  • Roll up of interest
  • Interest only available

Light Refurbishment Mortgage

The light refurbishment mortgage can be used for many situations where the property needs some form of work to be carried out before it can be let to a tenant.

Other renovations may be carried out to increase market appeal or rental value or to capitalise on uninhabitable property purchased at auction. In some instances, a home missing only a functional bath or WC would not be mortgageable with conventional Buy-to-let mortgage lending, a light refurbishment product offers a viable solution to avoid mortgage retentions or needing bridging finance.

Typically light refurbishment would limited to non-structural work and other work that would not need planning permission or other building work that needing to be regulated under building regulations. For renovation programs that would incorporate change of use or planning consent, such as converting a single dwelling to multiple dwellings, the medium or heavy refurbishment finance products could be used.

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