What is Bridge to Let?
Bridge to Let finance is intended for property investors looking to retain the property as a buy-to-let investment after refurbishing. The same lender underwrites a pre-approved refurbishment bridging loan and a buy-to-let mortgage, essentially providing two loan products under a single application.
Advantage of Bridge to Let Finance
Packaging the bridging loan and investment mortgage together benefits the borrower in the following ways:
- Convenience and peace of mind knowing that you have a feasible exit route to repay the bridging loan when the refurbishment is complete.
- You can reduce borrowing costs by transferring to the buy-to-let mortgage at any time without penalty when the refurbishment is done.
- Bridge to let avoids the 6-month rule.
- There is no duplication of valuation and legal fees associated with refinancing to a new lender.
- Most bridge to Let loans do not tie you to their buy to let product, you can therefore refinance with another lender offering better terms.
Disadvantage of Bridge to Let Finance
Bridge to let loans do not suit all circumstances and are available through only a select number of bridging and specialist buy to let lenders. The advantages are clear, but borrowers need to be mindful of the downsides of the product if not well-managed and understood:
- Bridge to let loans offer convenience and peace of mind but may not be the lowest cost option.
- The criteria for a bridging loan differs to a buy-to-let mortgage. You must be confident that when you switch to a buy-to-let product, you meet the lenders buy-to-let criteria (max LTV, debt service cover ratio, minimum income, or other conditions) and your circumstances have not changed since the loan was originally taken out.
- With fewer bridge to let lenders than bridging lenders, there is less flexibility to cater for all circumstances for example, some lenders restrict bridging loan to light refurbishments only.
- The underwriting process will be slower as the lender has to process two loans the outset. It is not considered suitable if you need to complete quickly for example, an auction purchase.
Why use a bridge to let broker?
A big part of what we do as a professional bridging loan broker is to take the time to fully understand your circumstances and funding requirements to determine if a bridge to let facility is suitable for you. Contact us to discuss the options your options.