Case study: Refurbish then let with a bridging loan
An ‘amateur’ landlord who owned one rental property was looking to purchase a three bedroomed house in Essex, which required light refurbishments. This included a new kitchen, bathroom, central heating and modernisation throughout. The landlord intended to complete all of the work himself within 3-4 months of purchasing the property and estimated that it would cost £25,000 in total.
The property was valued at £240,000 and the customer required a loan of £168,000 to purchase the property and complete the work required. The projected end value of the property was £300,000.
The landlord had approached his current lender directly but they had declined his application based on the valuer’s report because it was deemed to be in too poor of a state to qualify as security for a buy to let mortgage. Knowing that he needed to act quickly or else he’d lose the property, the landlord contacted our Mortgage and Protection Advisers to find out if we could help.
As speed was key to securing the property, the Mortgage Broker recognised that a bridging loan may be the only solution and contacted Ingard’s Broker Team to find out which lenders may consider the case.
To enable the landlord to purchase the property quickly with the additional £25,000 which was required to complete the light refurbishment work, our team arranged a short-term bridging loan through one of our private funders.
The private funder was happy to lend the landlord a £168,000 bridging loan based on the property’s open market value. The funds were available within a matter of weeks, allowing the landlord to complete the purchase and begin work on the property.
To ensure the loan wouldn’t need to be repaid before the landlord had finished the work required, we agreed a 12 month term that could be redeemed any time after the first three months with no exit fees or early repayment charges. This guarantees that the landlord will not need to continue to pay for the loan for longer than he needs to and also provides him with extra time to complete the work should he experience any delays.
Whilst processing the bridging loan, our team had also started to arrange a buy to let mortgage which would pay off the bridging loan once the landlord had finished refurbishing the property.
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