July 2018
By Alan Cleary, managing director at Precise Mortgages
Imagine you have a customer who has seen a property they’d like to purchase at auction with the intention of letting it out in the future. The property is structurally sound, but needs a new kitchen and bathroom to bring it up to a habitable and rentable standard. The property is likely to attract a lot of interest at the auction and the customer needs a fast solution so they can buy it and renovate it before letting it out.
Traditionally, the customer would struggle to finance the project as high street lenders would decline a buy-to-let mortgage application on the grounds that the property is not in a lettable state. If you were approached by a customer in a similar situation, would you know where to go to secure them the finance they need?
Fortunately, specialist lenders such as Precise Mortgages can help. Bridge-to-let could be the ideal solution for customers who are property investors looking to complete their next project before renting the property out. It is suitable for buy-to-let auction purchases, properties which cannot have a traditional buy-to-let mortgage secured against them or those in need of refurbishment or renovation.
Bridge-to-let offers customers looking to exit on to a buy-to-let mortgage a number of advantages. Both the bridging loan and buy-to-let mortgage are typically taken out with the same lender, which means customers can apply for both products at the same time. Not only does it save the customer the time and effort of having to look for a buy-to-let mortgage once the loan term ends, it’s also more efficient. As speed is often of the essence when buying a property at auction, bridge-to-let finance is designed to be accessed quickly. Lenders will typically offer joint legal representation and automated valuation models to speed up the process.
We are able to consider refinancing your customer on to any of our buy-to-let loan products once they have completed the refurbishment of the property. It means there is no need to wait for six months’ ownership before refinancing and they can capital raise on the enhanced value. Customers can borrow up to 75% of the value of the property via a short-term loan, and we will allow background securities, such as a residential property or other buy-to-let properties, to be added into the deal. This allows customers to either increase the loan size or, because they are considered a lower risk, to benefit from a better product price. Once the work is completed, they can choose one of our buy-to-let products, which offer LTVs of up to 80%, and we will lend taking after-works valuation into consideration.
Customers opting for one of our non-regulated bridging loans can have a term of between one and 18 months. They can choose to reduce their fees with a 0% facility fee bridge, apply for their buy-to-let mortgage at the same time as the bridge or post-refurbishment work and withdraw capital on the completed project, allowing them to invest into their next project.