How a bridge loan might aid landlords who are dealing with hefty refinancing prices.

Remortgaging is no longer a practical option for landlords due to rising mortgage rates and a dwindling selection of packages. However, what is the alternate? Matthew Dilks provides a remedy.

One drawback of being a buy-to-let (BTL) landlord is passing up a property because you don’t have enough money.

When it comes to purchasing a home, both landlords and investors need to act swiftly, and doing so can be very challenging if you don’t have enough equity on hand.

This is happening more frequently now that the mortgage industry is in a perpetual state of flux.

Numerous lenders have swiftly pulled products off the market, frequently with little or no warning, as a result of rising interest rates and persistent uncertainty.

According to Moneyfacts statistics, 10% of mortgage offers were actually taken from the market in the final week of May, and rates for two- and five-year fixed rate arrangements have since jumped to 6.01% and 5.67%, respectively [data accurate as of 19 June 2023].

Due to the transient nature of many of these mortgage products, landlords may lose the opportunity to obtain a mortgage before it is discontinued and are subsequently unable to proceed with the acquisition of a property. You can start to feel the pinch on affordability and profit margins as interest rates rise.

The likelihood that many landlords won’t be able to remortgage at a favourable rate has grown, which could force them to switch to a conventional variable rate product transfer and incur even greater charges.

What is the answer to these problems with remortgaging?

A bridging loan may be able to help you in each of these situations by giving you a rapid way to get access to money and lowering your risk of missing out on a property deal.

This is due to the fact that bridging loans are perfect in circumstances where you may need to move quickly because you need money to buy a new house or renovate an existing one and are designed to help bridge the gap until longer-term financing can be arranged.

There are a lot of reasons you can take out a bridging loan, such as to make improvements to the house, such as installing double glazing, upgrading the boiler, or installing a loft and wall installation to satisfy forthcoming Energy Performance Certificate (EPC) regulations.

Maybe you’ve evaluated your real estate holdings and are looking for ways to boost your income by making little improvements to underperforming assets, including painting and decorating.

Another option is to purchase an unmortgageable home at auction, extensively renovate it to a high quality, pay off the loan, and refinance into a regular mortgage before renting the house out or profitably selling it.

When there is a chance of losing the property in the course of a deal, you can also utilise a bridging loan to stop a chain break. While you wait for another property to sell, you can utilise the money from a bridging loan to finance the acquisition.

Landlords and investors wishing to increase and improve their property portfolios must be able to move swiftly and easily given the current state of the mortgage market.

Remortgaging may no longer be an option for some due to the lenders’ continued rapid withdrawal of mortgages. In that situation, a bridging loan can prove to be an effective substitute by allowing you to swiftly obtain capital in a steadily shakier market.