Looking at a property project? Refurb to Let...

Looking for a property project?  Just because a property is run down or even classed as 'uninhabitable', does not mean you cannot get a mortgage on it.  Or, if you are intending to purchase a property to let out, but it's currently in an 'unlettable' condition.  Lenders will cater for these scenarios (dependant on the exact type of works required!).  In the main, the work required needs to be cosmetic - a redecoration, maybe a new kitchen or bathroom.  Many now offer 'refurbishment' loans where the work must be carried out within a period of time after purchasing the property (normally three months). 

Our good friends at Precise Mortgages have recently launched a product called the ‘refurb to let’.  This gives the flexibility of a bridging loan to carry out the works, and the certainty that the property will then go on to a buy to let mortgage once works are finished.  They will look at 75% of the property value at the outset and allow a re-mortgage up to 80% of the end value, once works have been completed.  The nice thing with this product is you have one processor to cover both parts of the underwriting, as well as just one surveyor to review the upfront property value and then again once the works are done. No mortgage repayments are required whilst the works are being completed, subject to terms and conditions of course!

There are a raft of reasons why this type of product might be taken. These could include properties needing work to meet minimum Buy to Let EPC ratings.  Or properties purchased at auction, that need work, or where they’ve been bought under value.  Or it could simply be a landlord choosing to refurbish the property to maximise the rental yield available.

Seek out a local architect to assist you with plans and costs and always make sure you set out your budgets from the outset.

Lenders will cater for all types of scenarios (dependent on the exact type of works required!).  Each lender will work on the surveyors comments once they have visited the property and adjust their offerings accordingly.  Just because the high street or your current lender says no, does not mean that it can't be done..

A Bridging Loan could help you if you need something short term.

There is an abundance of choice for consumers across the mortgage market currently and this includes the bridging / short term lending sector.

Bridging Finance is the term most used for funds to be used in the short term to facilitate a financial transaction which has either an urgent or short lifespan and which is primarily geared to a property transaction. The most regular type of transactions include: a property being purchased at auction: the purchase of a new property whilst the current one is still being sold: acquisition of a property which needs substantial renovation before it is suitable for a traditional mortgage or payment of an unexpected expense whilst more regular finance is being arranged. This can also be used for legitimate tax payments or short term business requirements.

More recently we’ve seen hesitation with new properties that would have sold with ease now coming across some delays as people decide whether to wait or not as the uncertainty of Brexit deepens. This inevitably might require the builder to look at refinancing their current and sometimes expensive development finance, whilst the properties remain on the market.

We’ve also just completed a Bridging Loan for a conversion of a Barn. The lender wanted full plans, permissions and a host of other information, but they offered short term funding with timescales of up to 18 months to get the conversion complete.

There are a myriad of other reasons for which short term lending can be applied and each application is looked at on its own merits before a lender will agree to assist. The best way to look at this is as a means to an end. These lenders will need certainty on the exit route (how will they get their money back?) and they will always insist on an agreement being in place from a traditional mortgage lender to provide a mortgage, at a given time and once any requirements have been fulfilled. Alternatively, the exit route might be from the sale of the same or another property. So, short term lending is designed to fulfill the need or desire to act quickly.

Finally, this type of funding has become more competitive over the years with some now offering rates as low as 0.44% per month for the right customer.  Obviously, individual terms and conditions apply and with these types of offerings, as always, seek professional advice!