Bridging the gap to enable a buy-to-let mortgage

In an article produced for FIBA’s Advantage magazine, we discuss how a bridging loan can be an enabler for a long-term Buy-To-Let mortgage.


A bridging loan is a type of short-term finance, which enables a borrower to access cash extremely quickly. Given the short-term nature of bridging finance, the borrower usually needs no longer than 24 months and this gives them time to have a solid exit strategy of long-term funding in place. Having a robust exit strategy shows the bridging lender how they intend to repay the loan at the end of the agreed term.


Bridging loans have many advantages, including:


  • Fast turnaround – funds can be made available very quickly, in some cases within a matter of days.
  • Customised solutions – each loan is evaluated on its individual merits and the solution can be tailored to the borrower’s specific needs and requirements.
  • Flexibility – most bridging lenders are not bound by the restrictive loan conditions other finance options are tied too.
  • Quick decisions – bridging lenders are known to turn things around quickly and can often offer terms within an hour of receiving an enquiry.

One of the most common reasons borrowers opt for a bridging loan is due to it being a great solution to set them up and secure a long term buy-to-let (BTL) mortgage with a mainstream lender. Buying a property with the view to renting it out, can be a great investment opportunity for property investors, if done properly. An increasingly popular approach for investors is to purchase a rundown property at a low price and refurbish it, resulting in a higher yield when rented. Often these purchases need to be completed quickly, for example when the property is bought at auction and the client only has 28 days to complete the purchase. That said, if the property purchased is derelict, has structural issues or is uninhabitable, most mainstream lenders will be unable to provide a mortgage. In addition, if the investor has not owned the property for a 6-month period, this will also limit their chances of obtaining a BTL mortgage.


Short-term finance can therefore solve both of these issues. A bridging loan can be used to purchase a property and make the necessary improvements, so the premises can be refurbished to a level where it can be rented. In addition, it can also provide the borrower with the time needed to pass the mandatory 6-month ownership timeline, or put in a tenant to provide 6 months of rental income. This will then enable the borrower to arrange a suitable long term BTL mortgage.


Property refurbishment can be used for many purposes. For example, an investor may want to renovate a building to allow for more space, convert a property with new layouts, or simply to make a few small changes, e.g. light internal redecoration.


At Hope Capital, a range of residential refurbishment loans were launched at the beginning of 2021 to facilitate the types of examples above. The range is specifically designed for borrowers undertaking a range of property refurbishment projects and includes high LTV’s and fantastic rates, making it an ideal solution for those who are looking to purchase and refurbish a property, ahead of applying for a BTL mortgage.


Hope Capital have supported many clients who need to carry out refurbishment works to get the property on the market for rental. By way of an example, Hope Capital were recently approached by a client who had secured a mid-terrace property at auction and needed to receive funding almost instantly, to complete the deal and carry out minor refurbishment works to get the property on the market for rental. Hope Capital worked with the client to create a solution, which enabled the client to meet the 28-day auction deadline, as well as receiving the finance needed to complete the refurbishment works. Once these works were finalised, the client had over 6 months proven ownership of the property, had secured a tenant and was then able to secure a highly competitive rate on a BTL mortgage.


Overall, bridging loans can be an ideal first stop solution, for those wanting to achieve a BTL mortgage in the long run. Not only does a bridging loan allow investors to have the funds available to buy a property quickly and efficiently, but it will also provide many opportunities to undertake the refurbishment works needed, prior to the application for a mortgage.

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