Bridge to Let Mortgage

If you’re a landlord looking to invest in rental property, it’s important to understand the benefits of a Bridge to Let mortgage and how it can help you acquire the right property.

In this insight, we will cover how bridge to let mortgages work, how to utiilise them, as well as what you need to know about refinancing and exiting the loan.

Key Takeaways

A Bridge to Let Mortgage can be used if a property is not ready for a Buy to let mortgage.
The loans are short term and an exit plan is required to refinance the loan at the end of the term.
Bridge to let loans have a fast turnaround from application to completion. This can be as little as a few days.
After refurbishments are complete, a Buy to Let mortgage can be applied for.

What is a Bridge to Let Mortgage?

A Bridge to Let Mortgage is a special type of loan that allows landlords to purchase a property that is intended to be used as a rental property. Bridging to Let is unique because it offers the flexibility to purchase a property quickly and then move onto a more long-term financing option, such as a buy-to-let mortgage.

A Bridge to Let Mortgage is one of the types of bridging loans, but this is specifically for landlords who are looking to purchase a property that will be used as a rental property.

This type of loan is short-term in nature, typically lasting between 3 and 12 months, and is usually used to bridge the gap between the purchase of the property and when a longer-term financing option, such as a buy-to-let mortgage, is available.

The main advantage of a bridge to Let mortgage is that it provides landlords with the flexibility to purchase a property quickly without having to wait for a longer-term financing option to be approved. This type of loan also offers landlords access to funds that can be used to finance the purchase of a property, as well as any repairs or renovations that may be needed.

It may be that a lender cannot agree a Buy to Let mortgage on the property in its current state and renovations are required before a Buy to Let mortgage can be agreed. A Bridge to Let loan can resolve this issue as the landlord can complete the developments required and later re-finance the development loan.

Looking For Mortgage Advice?

If you're thinking about your mortgage options ahead of a remortgage, a big move, or even to borrow more?

We can help you find a mortgage specialist to offer you the very best advice. Complete our Sunny Fact Find form to provide us a bit more detail about your circumstances and we'll find the best-suited adviser for your needs.

Your appointed adviser will contact you to discuss how they can help, you decide how to proceed.

How Does a Bridge to Let Mortgage Work?

When a landlord applies for a Bridge to Let Mortgage, the lender will review the application and determine the amount of money they are willing to lend. This amount will usually be based on the value of the property and the landlord’s credit scoring.

Once the loan has been approved, the landlord will be responsible for making monthly payments to the lender until the loan is paid off. At the end of the loan term, the landlord will either have to pay off the loan in full or refinance the loan with a longer-term financing option, such as a buy-to-let mortgage, commercial finance, or development loans.

Bridge to Let Mortgage Features:

Fixed terms up to 3 years
No minimum term
Open and closed bridging options
Loans can start as little as 25k
Fast approval turnaround (24-48 hours)
All property types acceptable

Bridge to Let Mortgage Eligibility

In order to be eligible for a bridge to let mortgage, landlords must typically meet certain eligibility criteria. These criteria include having a good credit history, a minimum income level, and a track record of successful rental property investments.
In addition, landlords must also have a clear understanding of the terms and conditions of the loan and be able to demonstrate that they have the financial capacity to make the monthly payments on the loan. It is also important for landlords to have a plan in place for refinancing the loan once the loan term has expired.

Pros and Cons of Using a Bridge to Let Mortgage

Understanding the benefits of a bridge to let mortgage is important for landlords who are looking to invest in rental property. This type of loan offers the flexibility to purchase a property quickly and move onto a more long-term financing option. However, it is important to understand the potential risks and disadvantages of a bridge to let mortgage before applying for one.

Pros

The primary benefit of a bridge to let mortgage is the flexibility it provides landlords. This type of loan allows landlords to purchase a property quickly without having to wait for a longer-term financing option to be approved. It also provides landlords with access to funds that can be used to finance renovations or repairs.
Another benefit of a bridge to let mortgage is that it is usually easier to qualify for than a buy-to-let mortgage. This is because the loan is short-term in nature and the lender is not required to review the landlord’s rental income or rental history.
Finally, a bridge to let mortgage can be a cost-effective option for landlords who are looking to purchase a property quickly and then move onto a more long-term financing option. This is because bridge to let mortgages typically have lower interest rates than buy-to-let mortgages and the loan term is usually shorter.

Cons

The primary disadvantage of a bridge to let mortgage is that it is a short-term loan and the landlord must be prepared to refinance the loan once the loan term has expired. This means that the landlord will have to pay the loan off in full or secure a more long-term financing option, such as a buy-to-let mortgage.
Another disadvantage of a bridge to let mortgage is that it can be more expensive than a buy-to-let mortgage in the long run. This is because bridge to let mortgages typically have higher interest rates than buy-to-let mortgages and the loan term is usually shorter.
Finally, a bridge to let mortgage can be difficult to qualify for due to the strict eligibility criteria. This means that landlords may not be able to secure a bridge to let mortgage if they do not meet the lender’s requirements.

Alternatives to a Bridge to Let Mortgage

For landlords who are unable to secure a bridge to let mortgage or who do not meet the eligibility criteria, there are other options available. These options include a buy-to-let mortgage, a personal loan, or a home equity loan.

Buy to let mortgages

A buy-to-let mortgage is a loan specifically designed for landlords who are looking to purchase a property that will be used as a rental property. This type of loan typically has lower interest rates and longer loan terms than a Bridge to Let mortgage, making it a more cost-effective option for landlords.

Personal loans

A personal loan is another option for landlords who are looking to finance the purchase of a rental property. Personal loans are generally easier to qualify for than a buy-to-let mortgage and can be used to finance the entire purchase price of the property. However, as the size of a personal loan increases, the acceptance rate becomes lower.

Remortgage

Finally, a remortgage to release equity, could be an option for landlords who have built up equity in their existing home. This type of loan allows landlords to access the equity in their home and use it to purchase a rental property.

Bridging Loans

There are other types of bridging loans available which may be suitable for your Bridge to Let needs. Consider, what can a bridging loan be used for, when making your decision.

How to apply for a Bridge to Let Mortgage

The first step to applying for a bridge to let mortgage is to research lenders and compare rates and terms to find the best loan option. Once a lender has been chosen, the landlord will need to prepare an application package that includes financial documents such as bank statements, tax returns, and proof of income.
The lender will then review the application and, if approved, the landlord will be required to sign a loan agreement. After signing the agreement, the lender will disburse the loan funds and the landlord will be responsible for making monthly payments until the loan is paid in full.

FAQs

Do you need an exit plan for a bridge to let loan?

Yes, it will be a requirement of the loan that you provide details of an exit strategy to qualify for a bridge to let loan.

This can include refinancing the loan to a Buy to Let mortgage after refurbishments are completed.

Can I get a bridge to let to buy a property at an auction?

Yes. You can use the funds from a bridge to let loan to buy a property at auction.

Bridge to let loans are popular choices for financing auction property as the loan completion turnaround is just a few days.

What deposit is required for a bridge to let loan?

Most lenders will require a deposit of at least 25% for a bridge to let loan.

If you’re a landlord looking to secure a bridge to let mortgage, it’s important to do your research and compare lenders to ensure that you get the best rate and terms possible. It is also important to have a plan in place for refinancing the loan once the loan term has expired. By understanding the benefits and risks of a Bridge to Let mortgage, landlords can make an informed decision and get the most out of their rental property investments.