Bridge to let mortgage guide
A bridge to let mortgage can be a great way for property developers and landlords to quickly build out their portfolio. This type of finance allows you to buy properties that may otherwise be classed as ‘unmortgageable’ due to needing significant repairs.
These mortgages can be useful in a number of other circumstances too. You may not have the funds needed to renovate the property you want. You could also be unable to get the mortgage you need through traditional buy to let.
In this section:
- What are bridge to let mortgages?
- How does a bridge to let mortgage work?
- Who is the best bridge to let mortgage lender?
- Pros and cons of bridge to let mortgages
- Applying for a bridge to let mortgage
- How much can I borrow with a bridge to let mortgage?
What are bride to let mortgages?
A bridge to let mortgage is a form of bridging finance or ‘bridging mortgage’. These mortgages are commonly used by landlords or investors that are buying properties that need significant renovations or repairs.
The main reasons landlords may choose a bridge let mortgage include:
- Buying a property that needs extensive repair work
- Buying a property at auction
- Buying a property deemed ‘unmortgageable’
- Buying or converting a property to a HMO (Home of Multiple Occupancy)
- Renovation work for a buy to let property
- Buying a commercial buy to let property
Bridge to let mortgages generally aren’t accessible via most mainstream lenders. You will normally need to look at more specialist lenders for this type of loan. This is where it can be helpful to get proper advice from a qualified mortgage expert.
How does a bridge to let mortgage work?
Bridge to let mortgages are useful when a traditional buy to let mortgage isn’t available. This will usually work as a first step when buying a property to rent out to tenants.
If the property is ‘unmortgageable’, bridge to let can help fund the renovations needed for the property to be inhabitable. During the bridging period of your mortgage, you will carry out the repair work. When this is completed, you speak to your lender to request to switch your bridging loan to the buy to let mortgage your lender has agreed to.
The bridging element of your loan will be short term. This period will last for 12 months initially (in most cases). You will then move onto a longer term loan in the form of a standard buy to let mortgage (traditional mortgage).
Usually, you will be pre-approved for your buy to let mortgage with the same lender. You could choose to have your buy to let mortgage with another lender though if this works better for you.
Who is the best bridge to let mortgage lender?
There are various options available for bridge to let mortgages, but most of these will be more specialist lenders. This type of mortgage is not normally available through a typical high street lender such as HSBC or Barclays.
The best way to find the right lender for your bridging mortgage is to make sure you get the right advice before you apply. A qualified mortgage broker can save you the hassle of searching high and low for lenders that will provide these mortgages. It also means you will have access to support and guidance during the application process.
Pros and cons of bridge to let mortgages
Before applying for bridge to let mortgages, you should think about the main advantages and disadvantages of this mortgage type.
|Quick and easy application process
|Delays in renovation/repair works could cause issues with payments
|Low-cost option to quickly build your property portfolio
|You can only access bridge to let mortgages through a qualified broker
|Less competitive form of mortgage
|There can be additional fees included with these mortgages
|Can allow you to buy properties classed as ‘unmortgageable’
|You can end up with higher interest rates
|Less capital needed (as the loan amount will be lower compared to standard buy to let)
|You need to have a set exit strategy in place before a lender will approve your loan
|Useful if you don’t have the funds needed to repair the property you want to buy
|Less lenders provide this mortgage type compared to traditional buy to let
Applying for a bridge to let mortgage
When you apply for a bridge to let mortgage, there are certain criteria a lender will consider. They will look at the usual criteria plus extra requirements due to the mortgage type.
The main criteria for bridge to let mortgages:
- Your deposit amount: Lenders will usually require a deposit of at least 20%-25% for bridge to let. As with most mortgages, the higher your deposit is, the better the rates available to you will be.
- Do you have additional security available for your mortgage? E.g. other properties or assets (can be used in addition to your deposit)
- Affordability will be assessed twice: You will be assessed based on your bridging finance application. You will then be assessed based on the criteria for buy to let mortgages.
- Do you have previous experience of property renovation?: This can help reassure lenders you have the skill and experience required to see the project through successfully.
- Your credit score and credit history will also be assessed: This isn’t as important with bridging finance. It can certainly be preferable to lenders for you to have a history of good credit.
- Property plans: You will in many cases be required to submit your plan for the property following the renovation. This is so lenders can assess how you will repay the buy to let element of your mortgage.
You can take out bridging finance separately to your buy to let mortgage. The bridging lender will want to see evidence that you have a lender in place for the buy to let element of your mortgage.
With extensive repair work, the lender will want to be comfortable and confident that you will be able to repay your loan. People with bad credit for example may find it much harder to get this type of mortgage without the help of a qualified mortgage broker.
How much can I borrow with a bridge to let mortgage?
The limit for borrowing will vary depending on the lender you choose for your bridge to let mortgage. Typically, lenders will prefer a maximum loan to value (LTV) of 75%, meaning you need a deposit of at least 25% of the property’s value.
These mortgages can be more complex to arrange, which means it is important to get the right advice before you apply. A broker with the right knowledge will be able to find the lender best suited to your circumstances, allowing you to borrow the largest amount possible.
Our skilled mortgage specialists have more than 20 years of expertise, helping hundreds of borrowers to find the right mortgage.