Some residential property does not qualify for a buy to let mortgage unless it is refurbished. A new type of loan is being trialled to make financing these properties easier.
A common property deal is one where a landlord buys cheaper property that needs refurbishment work. These types of properties may not qualify for a commercial mortgage, so bridging loans can be used to purchase the property. After the refurbishment work has been completed, a standard buy to let (BTL) commercial mortgage can be obtained and this is then used to repay the bridging loan. This requires applying for two loans, the bridging loan followed by the buy to let mortgage.
This new loan type is a bridging loan that converts to a standard buy to let mortgage after renovation work has been completed. These loans are available for individual landlords and for limited companies.
As one example, new regulations mean that property with low energy efficiency ratings of F or G cannot be rented. The new loans are suitable when upgrading the energy efficacy of property.
These new loans are being trialled with a selected number of brokers before they will become available from most brokers. The buy to let part of the loan is available on two- or five-year fixed rate terms. Loans up to 80% loan to value are available. Landlords will be expected to complete the refurbishment work within six months, otherwise, the buy to let offer part of the deal may expire.