16:24 PM, 6th October 2015, About 6 years ago
An increasing number of property investors are using bridging finance to expand their property portfolio. The main uses are for auction finance where they usually have 28 days to complete and for purchasing properties that are not in a habitable condition and hence they can’t get a mortgage.
There are lots of reasons for purchasing properties that require refurbishment and/or conversions. These include a capital gain, higher rental returns, lower ongoing maintenance costs and a higher caliber of tenant.
With bridging finance borrowers normally have the option to have the interest added to the loan. This greatly assists their cash flow whilst they are doing the refurbishment and the property is vacant.
However, historically this would entail two lots of fees: two valuations, two sets of legal fees and two lots of lenders fees making a big dent into your profits.
Also it would involve two applications, time delays and no certainty of the BTL mortgage (as the exit route for the bridge) being available.
Now we have the Bridge to Term product.
This still gives all of the benefits outlined above without all the additional costs, delays and uncertainty. This is possible when the bridging lender and BTL lender are one and the same and the following applies:
• One application
• One set of Legal fees (we have lenders offering free legals)
• One valuation
• Reduced lender fees
• Elimination of delays
• Certainty of BTL mortgage
Client purchased a detached house in a dilapidated condition which was unsuitable for a term mortgage.
Step one: Bridged for £225,000 against a purchase price of £300,000
Step two: Client completed refurbishment and extension for a cost of £45,000
Step three: Property valued at £450,000
Step four: BTL Mortgage for £360,000
The client was left with a cash surplus of £15,000 prior to finance charges and fees and ready to do the next project and with the available cash.
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