Bridge-to-Let Mortgages

Bridge-to-let mortgages can be complex loans to get to grips with, due to the different interest rates and the two-in-one product you’re often agreeing to, but there are circumstances when they can be a good option for buying an investment property.

By following this guide you’ll have a far better understanding about how this type of finance works, why they might be suitable and how you can get one.

What is a bridge to let mortgage?

A bridge-to-let mortgage is a ‘two-in-one’ arrangement where a bridging loan can be used as a quick, short-term funding option for purchasing a buy-to-let property before refinancing onto a long-term home loan.

All bridging loans require an exit strategy.

In the case of a bridge-to-let mortgage, a lender usually won’t complete on the bridging element until at least an agreement in principle has been reached on a buy-to-let mortgage that will follow on from it.

Some lenders may insist on agreeing both the short-term bridge and the subsequent mortgage simultaneously but this doesn’t always have to be the case.

You’re allowed to use one lender for the bridging loan and another for the buy-to-let mortgage, if a better deal is available.

When would you use a bridge-to-let mortgage?

This type of loan is typically used to bridge a gap in financing (hence the name) and can be used in a number of situations.

They include:

Whilst it’s fairly common to take a bridging loan and follow up mortgage with the same lender, because so much happens in a short space of time, it can be a good idea to seek advice from a broker with experience in bridging finance for buy-to-let properties before anything is agreed.

How to get a bridge-to-let mortgage

If you’re in need of a bridging loan to move quickly on the purchase of a rental property, there’s a few simple steps you can take to make the process more straightforward (and swifter).

Here’s how we’d recommend you do it…

Step 1. Get your documents ready and prepare your exit strategy

Having all your paperwork prepared and ready to hand in advance, particularly when time is of the essence, is a good first move. Bank statements, proof of income and address will be required.

You can find a full list of the paperwork you’ll need in our complete guide to mortgage applications.

In addition, it’s important to have a clear exit strategy in mind for the property you’re looking to buy.

In the case of a bridge-to-let mortgage it’s pretty much always going to mean refinancing onto a buy-to-let mortgage.

Step 2. Speak to an experienced bridge-to-let mortgage broker

This type of finance isn’t readily available through the more well-known high street lenders you’re used to speaking with.

That’s generally because the additional risks and expertise required leaves them very much in the domain of a specialist lender.

Rather than trying to find the right lender by yourself, the smart move is to speak with a broker who has experience with bridging loans and can work on your behalf, finding the right lender to deal with your particular requirements.

Your broker will be able to guide you through the whole process and manage your application, from start to finish, as quickly as they’re able so you don’t miss the opportunity to buy the property you’re looking for.

If you get in touch we can arrange for an advisor we work with, who’s best placed to help in this area, to contact you straight away.

Step 3. Download your credit reports.

Finally, reviewing your credit reports before you apply for any type of large finance is good financial practice.

Bridging lenders for buy-to-let properties will tend to focus on other factors, such as the rental opportunity and exit strategy but your credit history will also be checked.

You can download your credit reports through our dedicated credit reports hub.

Doing this in advance will give you the opportunity to remove any inaccurate or outdated information which could be to the detriment of your application.

What should your exit strategy be?

For all types of bridging loans, an exit strategy must be in place for the loan to be agreed.

There’s actually no ‘hard and fast’ rules on exactly how you exit the bridge part of the financing, but there must be a plan to allow you to repay the initial short-term loan and move forward with your property.

Generally, the two main options available for a bridge-to-let mortgage would be:

For some property investors, this type of finance also allows them to remortgage an entire portfolio at the same time where the purchase dates or remortgage dates are all different, with the exit strategy being a mass remortgage but all on the same date and product.

Are there limits on how much I can borrow?

Yes, they can be.

Most lenders will only lend you up to a maximum of 75% of the value of the property, although that percentage could be lower at around 65% or even 50%.

In some cases it will be the value of the property post-renovation (if that’s relevant) while in others, the limit might relate to the original state and purchase price.

In terms of absolute limits, this will also vary between lenders and depends on the type of property you buy and your planned exit from the bridging loan.

Typically, bridge to let arrangements will hit an upper limit at the £750,000- £1 million mark, but some lenders could go higher if required.

Once you exit the short-term bridging part of the loan different limits will apply, in line with the buy to let mortgage you choose.

Due to the complex nature of this kind of home loan and the requirement for a verified exit strategy from the bridging element, it’s important to understand exactly what those limits are and how they will apply to your overall financing agreement before it’s in place.

Remember, you don’t have to agree to both elements of the financing arrangement with the same lender. You can look elsewhere and see if better terms are available through a different provider.

Get matched with a bridge to let mortgage broker

If you’re considering buying an investment property that requires specialist finance such as a bridge to let mortgage, then speaking with an advisor who has experience in this area is the right place to start.

They can guide you through the process – swiftly – and make sure your application has all the details and documentation required to get the quick response you need from the right lender.

Call 0808 189 0463 or make an enquiry and we can arrange a free, no-obligation call with a mortgage broker who has the right experience in this type of finance today.