Bridging loan to bring property in line with new EPC standards

The client: An experienced property investor approached us looking for finance to purchase a further buy to let property. In addition to managing his property portfolio, the client is also an antiques dealer.

The property: The property in question is a three-bed detached house within the London commuter belt. In a prime location, the client believed it to be a great investment, however there was a slight issue… the property’s EPC rating was F. From April 1st 2018 landlords have been unable to grant a tenancy to new or existing tenants if the property’s EPC rating is F or G.
Before the client could let the property, he would need to increase in the EPC rating to at least an E. To do this, he planned to install a new boiler and replace the wall insulation.

The finance: As the house was deemed unlettable, it would not qualify for buy to let finance, so we suggested that the client purchase it using a bridging loan raising sufficient to be able to make the necessary improvements. Once the works are completed and the EPC rating has been reassessed, he can then refinance the property onto a buy to let mortgage.
The client’s good-size deposit was made up of savings which had been accumulated from both his rental income and antiques’ business.

The application process: The client agreed that a bridging loan would be the best way forward. We presented him with a variety of workable options and he selected a product with a six-month term. We then helped him collate all the necessary documentation in preparation for submitting the loan application. This included the following information:

• Itemised list of all properties with his portfolio including borrowing and rental income
• Proof of ID, residence and income
• Statement of assets and liabilities
• Costed schedule of works to be carried out on the property (including an estimated timescale)
• Solicitors

Having passed the credit check, the lender swiftly underwrote our client and the property and a formal offer for the full amount was promptly issued. The client plans to finish the renovations within three months giving us time to help him secure a suitable buy to let mortgage before the term ends.

Here are the details of the deal:

Property Details

Property value: £530,000

Loan amount: £344,500

LTV: 55%

Rate: 0.64%

Term: 6 months

Lender arrangement fee: 2% of loan amount (£3,897 added to loan)

Monthly payment: nil (interest rolled up)

Consultant: Steve Bedford, 01732 471609

8th June 2018