Buy to Let Bridging
- Friendly expert mortgage advisers
- We work with dozens of lenders
- Access to competitive rates
Buy to Let Bridging
Georgina Gray explains how a bridging loan on a Buy to Let works.Can I get a bridging loan on a Buy to Let? How does it work?
Yes, absolutely. You can use a bridging loan to purchase a Buy to Let – and it’s often called a ‘Bridge to Let’ when you do it this way.
Essentially, it’s short-term finance used to bridge the gap between buying a property and securing a longer term Buy to Let mortgage. It’s really common when the property isn’t quite mortgage-ready, or you need to move fast and won’t have time to arrange a standard mortgage.
Why would you need a bridging loan to purchase a Buy to Let property?
There are a few key reasons why you need a bridging loan to purchase a Buy to Let property. It could be that the property needs refurbishment or isn’t habitable yet. You can’t get a normal Buy to Let mortgage unless the lender can see that the property is ready to rent, and so a bridging loan gives you the time to do that work.
It could be that you’re buying at an auction, where completion deadlines are tight – usually around 28 days. Here, a bridging loan helps you move quickly.
Another reason could be that you want to buy before selling another property, or you plan to refinance later once you’ve added some value to the property you’re purchasing.
What is an exit strategy and why is this important? Do I need an exit strategy to secure a Bridge to Let?
With a bridging loan, having a clear exit strategy is probably the most important element. The exit strategy is simply how you plan to repay the bridging loan.
It could be selling a property, refinancing onto a Buy to Let mortgage, or releasing equity from another asset you own. Lenders want to see a clear exit before approving the bridging loan. Bridging is short-term finance, usually over 6-18 months – and without a solid exit plan, you wouldn’t be able to get the funding.
How much deposit do you need for a bridging loan on a Buy to Let?
Most lenders will require a minimum of 25% deposit. They’ll lend up to 75% of the Loan to Value. If you’re doing heavy refurbishment or development work, you can expect to put in a little more.
How much can you borrow on a Bridge to Let mortgage?
It varies a lot, but bridging starts at around £50,000. You can go well into the millions, though, depending on the project and your experience. The lender will base the loan on the property’s current value, your deposit, and the strength of your exit plan.
Speak To An Expert
Our highly experienced Advisers are ready to help you with either buying or remortgaging a home, protecting your property and lifestyle along with saving you time and effort, ensuring you have a competitive deal right for you.
What are the fees for Bridge to Let?
Fees can add up, so it’s important to factor them in. You’ll usually have an arrangement fee, which is around 1% to 2% of the loan you’re looking to borrow. There will also be monthly interest – although sometimes lenders apply daily interest – charged anywhere between 0.6% to 1.5%.
You’re going to have a valuation fee, you need to pay fees for independent legal advice, and there will also be legal fees for both sides. Some lenders also charge an exit fee, although most have got rid of that now.
Can you still get a Bridge to Let loan with bad credit?
Potentially, yes. Bridging lenders tend to be a little bit more flexible than traditional banks. If the deal makes sense, with strong security and a clear exit, some lenders will accept minor credit issues.
But if there are major defaults or unpaid debts, it will narrow your options – and that’s naturally going to push up the interest rates and fees.
How does remortgaging work with Buy to Let bridging?
Once the property is in a mortgageable or lettable condition, and ideally already producing some rental income, you can remortgage onto a standard Buy to Let deal. The remortgage then pays off the bridging loan.
This process is often called a Bridge to Let, because it’s designed as a seamless handover from short-term finance to longer term letting.
What are the pros and cons of using a bridging loan to Buy to Let?
The pros definitely include the speed that it offers, flexibility, and that you can use it strategically to add value and refinance at a higher figure. You might be able to release equity quite quickly from that property for an ongoing project, which is always good.
The main disadvantage is that bridging is more expensive. As mentioned, you must have a clear exit, too, otherwise you risk financial pressure. It’s not always suitable for everyone, especially if you’re new to property investment.
How do I apply for bridging to purchase a Buy to Let? What’s the process?
Start by speaking to a broker, ideally one with experience in bridging and Buy to Let. We’ll look at your circumstances, property details and exit plan, and match you with the right lender.
You’ll need documents like proof of funds, ID and property details. The process can move very quickly once everything’s in place.
You’ve demonstrated how a mortgage broker can help, but have you got anything to add?
A good broker can save you a lot of time, money and stress. We know which lenders move quickly, which ones accept properties in poor condition, and how to structure your exit so the deal works smoothly for you.
Bridging finance can be a really brilliant tool, but it’s specialist, so getting expert advice is key. If you’re thinking of a Bridge to Let or any other type of bridging, speak with a qualified broker early on in the process – then you’ll be going into it fully prepared.
Key Takeaways:
- Bridging loans, often called ‘Bridge to Let’, are short-term finance options for purchasing Buy to Let properties, especially when they’re not yet mortgage-ready or when quick action is needed.
- A clear exit strategy, detailing how the bridging loan will be repaid (e.g., selling the property, refinancing with a Buy to Let mortgage), is crucial for securing the loan.
- Most lenders require a minimum of 25% deposit for a bridging loan on a Buy to Let, with loans typically starting around £50,000.
- Fees for Bridge to Let can include an arrangement fee (1% to 2% of the loan), monthly or daily interest (0.6% to 1.5%), valuation fees, and legal fees.
- Using a qualified broker experienced in bridging and Buy to Let is highly recommended to navigate the process, find suitable lenders, and structure a smooth deal.
SOME BRIDGING FINANCE IS NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
Why Us?
- Friendly, expert mortgage advisers
- We work with dozens of lenders
- Access to competitive rates