The Buy-to-Let (BTL) market has come back swinging after a heavy hit from Aprils tax changes. Property listing site Rightmove has reported that the quarter following the increase in tax paid by landlords has seen a 30% increase in demand from BTL investors.
While some may contribute this spike to overseas buyers taking advantage of the lull in the value of Sterling, others put this markets resilience down to how open it has become over the past few years.
An ever-increasing number of lenders are offering products perfect for the needs of every aspiring landlord.
Products have never been more diverse, and this volume is making it a great income generator for UK brokers. But what if it’s not the landlord standing in the way of a BTL deal; it’s the property? Well, a Bridge-to-Let could be the answer.
There are a whole host of reasons why a property could be classed as unmortgageable. From kooky constructions to selective lease holding, these “problem properties” can be troublesome. For a property to be classed as “unmortgageable” it could fall into any of the following categories:
Without a bathroom and kitchen
Low value (most lenders consider this less than £50k)
On a short lease (for leasehold properties)
Structurally unsound (Built near mineworks or flood planes)
Non-standard constructions (concrete, steel framed)
That’s not to say that they’re without merits. Although in their current state they’re unmortgagable, they also usually have a low price tag – making them a great acquisition for landlords. Restrictions on mortgaging (particularly with buy-to-lets) could stop a property with money-making power from reaching it’s potential, and that is where a bridge comes in.
The quick release of funds can be put towards renovations on the property to make it habitable, before securing a mortgage against it at its new value.
Sub-par property interiors and beyond
A bridge can be used to increase yield in properties with interiors that have seen better days. Sprucing up the interior of the property could increase its market value which would allow your client to borrow more against the house in terms of a mortgage.
It’s also a relatively simple way to make a property more desirable, more readily lettable and possibly even increase the rent which could be attained.
Bridge-to-let products can also be used to quickly secure properties at auction.
The Perfect Product(s)
When considering financing a bridge-to-let, there are a couple of ways to do it.
The bridging loan and buy-to-let mortgage could be secured at separate times, allowing the client to thoroughly explore their options and weigh up their present circumstances.
The main draw of this method of finance is the flexibility and control that is placed in the hands of the client. With your help, they can source and apply for each product when they’re ready – shopping around for the best deal possible. Particularly in the property market, situations can change at the drop of a hat and being able to choose products when needed may make some clients more comfortable.
Lenders have started to take notice the popularity of the bridge-to-let financing a transaction in this way. Some have combined both the bridge and the BTL funding into one transaction. As the two products are combined, the BTL mortgage is pre-approved (subject to agreed works being completed).
All in all, this method of funding provides a smoother transition from a short-term product to a long-term product. While your client may not be able to look around for the best rate at the time, they have the security of having the next step already lined up.
Speaking to an expert at Crystal Specialist Finance could help you and your client work out a bridge-to-let strategy that suits their needs. From sourcing individual products for the best rates to taking advantage of the smooth transition of a bridge-to-let product, we have lenders on our panel that could help you.
Contact your BDM today to see what we can do for you and your client:
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