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Bridging Finance to Purchase and Renovate Unmortgageable Property

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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.

Renovate Unmortgageable Properties Details at a Glance

Facilities from £65,000 to £10 million
1st Charge loans
2nd Charge loans
No ERC
No minimum income
Roll up of interest
Interest only available

Accepted Properties for Unmortgageable Properites

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

About the 6-Month Remortgage Rule

The 6-month is rule observed by virtually all residential and buy to let lenders protects against artificial house price inflation as we began to see in the property boom around 2003 – 2008.

In the boom, we saw property investors buying at one price on one day and remortgage days later on a draw down facility.

The refinance was based on a higher valuation with none or negligible improvements ever carried out that could justify the hike in valuation in such a short period.

While the majority of lenders enforce a 6-month period, some use a 12-month period in which the property cannot be refinanced at a higher value.

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 out or sold to home buyers.

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
Completions within 28-day deadline

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.

Bridging Finance Working Example

Working example House Refurb:

Purchase price: £229,950
Loan amount 80% LTV: £183,960
Cost of works: £34,000
Refurb term: 4 months
End value: £342,000
Mortgage amount 80% LTV: £273,600

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.

Bridging Loan Calculator