Refurbishment Buy to Let Mortgages

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Refurbishment Buy to Let Mortgages

Lots of investors tend to buy investment properties which are un habitable and un lettable. They then seek to do a refurbishment which leads to a uplift in value. The investor then re finances the property on a ordinary buy to let mortgage product at the higher value. In some cases the investor is able to pull out a most of the cash used to acquire the property and even the refurb cost spent. This strategy is called the buy, refurbish and re finance strategy. This allows the investor to recycle their money and use on other projects. 

You may be wondering what mortgage products will allow you to purchase a property which is un habitable? 

I will explain below for you!

Table of Contents

Bridging Loans for refurbishment

A bridging loan can be a great way of helping you acquire a property if its un habitable. To find out more about how bridging loans work please click here.

Most experienced property developers use bridging loans in order to acquire a property and add value by refurbishment or converting the property. 

Property developers tend to exit the bridging loan through re finance onto a buy to let mortgage over a long term period or they sell the property for a profit.


Are Bridging loans worth it?

Yes, bridging loans are worth it if it’s short-term finance you need and if you are waiting for another event to happen. For example: If you are purchasing a property which is in need of refurbishment it may be difficult to obtain an ordinary mortgage as the property may be un habitable . In this case you would obtain a short-term bridging loan to complete the refurbishment and bring the property up to standard. You would then exit the bridging finance by either selling the property at a higher value or re-financing onto an ordinary buy to let mortgage.

Speak To Hemal

I have successfully assisted hundreds of people get their dream mortgage. With many years of experience as a Mortgage Broker. I have come across all types of clients who have trusted me to guide them through what can feel like a daunting process. I provide and lead my clients through this entire process with a precise, attention to every detail, in an effort to make sure their mortgage plans are being met with clarity and proficiency.

What is the interest rate for Bridging finance?

The interest rate payable on a bridging loan can depend on many factors. The loan amount against the value of the property, the work needed to the property, the type of property and many other factors. Interest rates are usually charged monthly whilst you are in the short-term loan. The interest rates usually start at 0.5% to upwards of 1% per month. Again, this depends on the scenario. There are also other costs to factor in.

We are able negotiate products with lenders on your behalf so contact us now and we would be most happy to guide you through the process.

100% Loan To Value Bridging Loans

Some bridging finance lenders can lend up to 100% of the property you are purchasing or refinancing. Some examples of this are if you have other properties in the background, you could offer those as security to the lender to obtain 100% finance. Another example would be getting a bridging loan on the actual value of the property as opposed to the purchase price. What that means is if you are buying a property below market value because it needs a lot of work, you could get finance on using the value of the property once the works are done.

How much does a Bridging loan cost?

The cost of the bridging loan can depend on your circumstances and what you are trying to accomplish. Bridging loans can cost from 0.49% per month to over 1% per month. Some bridging loan products have a retained interest element which means you make no monthly payments. Instead, the interest is added to the loan and you pay this when you exit the bridging loan.

Some bridging loan products offer serviced interest which means you make the interest payments monthly. Your affordability to make payments however will be assessed by the lender. 

Bridging loan for property auction

Bridging loans are designed to be short-term, interest-only loans that provide necessary credit to a buyer before they secure their main source of funding. These types of loans are granted much faster than other lines of credit, however, they have a higher interest rate and require proof of an exit strategy.

A broker who is savvy in auction finance and bridging loans can help you get your paperwork and exit strategy in order for a quick approval. There are many ways that lenders repay their debt, including selling the property, refinancing the property, or paying off the debt with cash. Please click here to find out more about auction finance.

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About the author

Hemal is an expert in mortgages and has successfully helped many people buy and remortgage their properties by fully assessing your needs and making advice and recommendation that suits your circumstances.
Hemal started the business during the pandemic and put customer service and expert advice at the forefront. Hemal has had media publications like BBC news, BBC radio and other media sources.
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