Bridge to Let Mortgages
A bridge to let mortgage is a bridging loan used on a Buy to Let mortgage. This is a fixed-term loan which can be used to reserve a property that you intend to rent out, but don’t yet have the mortgage or deposit for.
This type of loan can be used for either commercial or residential property, with an exit strategy that involves either refinancing onto a normal Buy to Let mortgage or renting the property out partially or in full.
Your potential monthly rental income will be used to quantify your loan, so should be at least equal to your repayments.
Do I need a bridge to let mortgage?
A bridge to let mortgage can be used if you’re buying a commercial, residential or mixed property but cannot afford the deposit upfront, or if you’re in a rush to get things moving quickly. With such a competitive housing market in the UK, especially within the Buy to Let space, speed is often an important factor in whether you purchase a property or not, so a bridging loan can be especially helpful to boost your application and increase your chances of securing your investment.
You can also use a bridge to let mortgage for properties being bought at auction, or those that need a bit of work doing to them.
What are the benefits of using a bridge to let mortgage?
There are plenty of advantages to using a bridge to let mortgage.
You can get pre-approved exit finance
Bridging loans are vital when helping to purchase a property when it may not otherwise have been possible. If you need to prove your exit strategy before you complete on your property purchase, a bridge to let can be really helpful.
They can make you more appealing to the seller
Using a bridging loan can help you to complete quicker on the sale of a property as it will take less time to underwrite and complete on than a traditional mortgage. In some cases, the bridging finance on your Buy to Let mortgages could even be done in a matter of days!
Bridging loans can also be used when you want to buy on a property before the sale of your existing property is completed, meaning you can bypass the issue of being stuck in a chain. Providing the sale and purchase are both considered affordable by your lender, a bridging loan can be used to close the gap between each of them and pay the loan back in full once the sale of your existing property has been completed.
Before opting for a bridge to let mortgage, however, we would always recommend that you speak to a specialist accountant to understand the tax benefits and implications for your specific circumstances.
Do I need to be an experienced landlord to get a bridge to let mortgage?
In general, no, you don’t need any prior experience in being a landlord or using Buy to Let mortgages in order to be accepted for a bridge to let mortgage. That said, there are some cases where your lender may need a bit more reassurance from you before they are willing to consider your case.
If you are taking on a big project with renovation work and there is a larger potential for things to go wrong, they may ask to see a detailed business plan or history of other successful projects that you have worked on in order to accept you for a bridging loan. They understand how complex and expensive the renovation and housing markets can be, and don’t want to invest in a potentially risky project that could end up making a loss.
If you are new to the Buy to Let world, it may be better to start off with an easier project so that you can build up a portfolio and take on bigger renovations in the future.
Can I use the loan to renovate my property?
Absolutely! If you’ve found a building that’s in need of a bit of TLC, it can be a great project to sink your teeth into, as well as a great investment opportunity. Although it can be hard work, the end result will often be worth it.
It can be hard to find a lender that is willing to give you a mortgage for a building which is deemed uninhabitable, as they are considered high risk. Many High Street brands don’t offer this type of mortgage at all. If you’re unable to do up the property within your budget, it may mean that the house is repossessed or you are unable to sell, meaning you cannot make your mortgage repayments.
Thankfully, though, there are also a range of lenders that specialise in providing mortgages for this type of property, meaning that you can be one step closer to building your dream rental. Bridging lenders in particular tend to have a higher appetite for risk and are more likely to consider the viability of the project as a whole. You can use a bridging loan to get your property up to a good standard, and then apply for a regular mortgage once your work is done.
At CLS, we have access to specialist offers that aren’t available elsewhere, meaning you can be sure you’re getting the best deal when you secure a Buy to Let or bridge to let mortgage through our brokers.
How much can I borrow on a bridge to let mortgage?
The amount that you’ll be able to borrow towards your bridge loan is calculated based on a number of different factors, and it is different to how a normal mortgage works for standard residential and Buy to Let agreements.
The bridge element of your loan is calculated separately to the ‘to let’ element and there are two options in terms of how interest is paid. You can either pay monthly interest payments and have the loan serviced, or make no monthly payments and have the interest added to the loan when it’s taken out.
If you add interest onto the loan and have a suitable exit strategy, you do not need to evidence how you will afford your repayments. If you add the interest on monthly, then a normal affordability assessment will need to be completed as part of your application.
Will I still need a deposit for a bridge to let mortgage?
Yes, a deposit will still be required. Most lenders will provide a loan up to 70% of the full value, which means that your deposit will need to be 30% or more. Some lenders may differ from this, and it can depend on your own personal circumstances, so don’t think it will be impossible to proceed if you have a smaller deposit.
What if I have a poor credit history?
As with any credit lender, most mortgage providers would prefer for you to have a good credit history, as it means you are a lower risk to them. However, there are lenders out there who are more than happy to take on customers with a poor credit history.
There are a whole host of things that can cause a poor credit rating, including:
- County Court Judgements (CCJs)
- faults on your credit file
- Too many hard searches on your credit file
- An IVA, DMP or DRO
Bad credit can even occur for people who just haven’t built up their credit history yet. For example, you may have a poor credit profile if you’re a young adult who is new to finance, or if you’ve just moved to the UK.
Although having bad credit can make your options for a mortgage provider smaller, it absolutely doesn’t mean this is an impossible task. All lenders have different eligibility criteria for their customers which is why it’s so important to work with a specialist mortgage broker who can search from a massive market for appropriate deals and make sure you get the best possible deal.
What is a bridging loan exit strategy?
If you are taking out a bridge to let loan, you must have an exit strategy to repay the loan when the time comes. This type of loan is designed to be short-term, so can be seen as more expensive than longer term loans – but if you pay them off in time then they are an excellent way to get hold of funds quickly at a crucial point in your project.
When you reach the end of your loan term, you will be expected to repay the loan in full. This is usually done with the sale of a property. If you’re unable to make your repayment, your account will be placed in default, which will appear on your credit file unless it’s resolved quickly.
If your exit strategy fails, there are a number of options for you:
- Extend the loan with your existing lender. This may only be possible if you’re not near the limit of your loan to value, or if the lender refuses to extend.
- Refinance with a new lender. This may mean you need to pay setup costs again, and you will need to organise a new exit strategy. It’s worth understanding whether this option is feasible in the longer term or if you could end up defaulting again.
- If you are still unable to repay your loan, the lender can repossess your property, and this could severely damage your credit file and your future financial prospects.
How much does it cost to take out a bridge to let mortgage?
There will usually be setup fees involved when you take out a bridge to let mortgage, as well as interest that you will need to pay over the course of your loan term.
Typically, you will be charged:
- A valuation fee for the property
- A facility fee (up to 2% of the loan)
- An exit fee (around 1% of the loan)
- A broker fee (if applicable)
- Legal costs (for conveyancing of the property purchase and refinance)
All fees will all be provided to you upfront so that you can determine whether the loan is affordable for you.
Applying for a bridge to let mortgage
There are a few different factors that will be taken into account when you apply for a bridge to let mortgage. You may be asked for:
- Details of your credit history
- Other personal details (your age, occupation, address, etc)
- The details of the property you’re purchasing
- Whether you have renovated a property in the past, along with evidence of this
- Whether you will be able to refinance or sell the property before the loan period ends (this will form part of your exit strategy)
- Details about any other assets you own that you could secure funding against if necessary
- Your affordability for monthly repayments (if you’re going down this route)
- How likely it is that your property could be resold if the required renovations are not completed
At CLS, we want to make the process as quick and simple for you as possible. All you need to do is enter some details into our ‘Get Started’ form and we will get in touch to start finding you the best bridge to let mortgage.
Wherever possible, we will provide you with a range of options and will be on hand to talk you through each of them so that you can decide which will work best for you.
We’re happy to take over the application process for you, meaning you can rest safe in the knowledge that your mortgage is being dealt with by the professionals. We will provide regular updates so that you know where you are in the process and can always answer any questions you may have throughout the journey.
We also offer face-to-face mortgage advice throughout Essex and the South East of England, as well as an online mortgage advisor service via telephone and email to customers throughout the UK.
If at any point you’d like to discuss your options with us, change any information or just want to talk anything through, our friendly team are always here to help.
Why choose CLS?
We are the UK’s number one specialist mortgage advisors and have worked with thousands of applicants to help them secure the right deal in all kinds of circumstances. Whether you’ve got poor credit, a complex income or are purchasing an unusual building, we have seen it all – and we’ll know exactly how to assist.
We have access to thousands of exclusive mortgage offers that you won’t find anywhere else – including plenty of bridging loan agreements designed for Buy to Let purchases – so you can be sure that you will always get the best deal with us.