Bridging finance has become a popular funding option for investors looking to purchase buy-to-let properties. Often overlooked is the way in which a wide variety of bridging products are available for property investments.

Three of the most popular of which are as follows:

1. The 85% LTV Bridging Loan 

The 85% LTV bridging loan is ideal for investors looking to cover as much of the project’s costs as possible. 85% is typically the maximum LTV a lender will offer, though there are occasional exceptions to the rule.

This type of bridging loan is perfect for picking up properties in need of renovations and improvements. A property can be purchased with a bridging loan, renovated to boost its market value and sold on at a profit. At which point, the loan can be repaid in full and the rest of the proceeds retained by the investor.

With monthly interest rates starting from as little as 0.5%, it can also be a uniquely cost-effective facility.

2. Bridge to Let 

As the name suggests, this is a type of bridging loan issued to those looking to purchase, refurbish and ultimately let out properties to tenants. As in the example above, the loan can be used to purchase a property in need of work at a bargain price, organise the necessary refurbishments and place it on the private rental market.

When the bridging loan term comes to an end, the outstanding balance can be transferred to a conventional buy to let mortgage. The beauty of bridging finance often lies in the speed and simplicity of the facility, a far cry in both instances from a conventional mortgage.

Whereas a standard mortgage or home loan could take several weeks or even months to arrange, bridging loans can be accessed in a matter of days; ideal when looking to make the most of time-critical investment opportunities, such as when properties go under the hammer at auction.

3. Refurb to Let Mortgage 

This is a special type of bridging loan issued for the purchase of an ‘un-lettable property’, which would not be considered eligible for a mortgage by any major bank. It is a longer-term agreement than a conventional bridging loan, therefore is not suitable for fast-profit house-flipping in the conventional sense.

The mortgage is underwritten against the assessed rental income of the property, after the work is being carried out. It can be a quick and simple facility to organise, essentially blurring the lines between bridging finance and a more conventional mortgage.

One of the benefits of refurb to let is the option of repaying the loan gradually over several years, spreading the costs of the property purchase. It is a popular option among investors setting their sights on long-term buy to let investments, involving properties in need of light refurbishments before being let out to tenants.

For more information on any of the above or to discuss any aspect of bridging finance in more detail, reach out to a member of our team for an obligation-free consultation.

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