Bridging loan to purchase BTL in unlettable condition

Bridging loan to purchase BTL in unlettable condition

23.05.17 | Written by: Nick Helm

We were approached by a couple of clients, cousins, who together own a few buy to let properties. They approached us for help in sourcing a buy to let mortgage to purchase a three-bed mid-terraced house in Kent.

We worked with the pair to find an appropriate product and submitted an application. Unfortunately, the valuation report concluded that the house was in too poor a state to qualify as security for a buy to let mortgage (which are only granted on immediately habitable dwellings). It needed to be.

Keen to continue with the purchase anyway, we suggested that the clients apply for a short term loan sufficient to buy and refurbish the house which needed to be re-wired and required a new kitchen and bathroom. When ready to let, they could then re-apply for a buy to let mortgage.

The clients agreed and so we researched a variety of suitable finance options for them. In light of their lack of experience with refurbishment projects, the clients chose a product that offered a great deal of flexibility - a 12-month maximum term and no ERCs or exit fees giving them the freedom to remortgage or sell the property without penalty as soon as they are ready.

Here are the details:

Property value: £156,000

Loan amount: £93,521

LTV: 60%

Rate: 1.30% per month

Term: 12 months

Monthly payment: None (£1,307 pcm retained interest)

Lender facility fee: Nil     

Lender exit fee: Nil

Rental income: £850 pcm when refurbished

Anticipated yield: 6.5% pa

Consultant: Nick Helm, 01732 471608

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.