Bridging Loan for Buy to Let Property

Bridging loans offer short-term finance for those who need to quickly raise capital on a property, or secure a loan on a property considered unmortgageable. Landlords often used bridging loans to buy rental properties or make improvements to them.

Bridging loans are becoming increasingly popular with landlords at the moment due to changes in the way they pay tax on their rental income from buy to let properties.

Why landlords use bridging loans

Although landlords often use bridging loans to purchase buy to let properties when they need to move fast and don’t have time to apply for a mortgage, they are increasingly being used by landlords to improve buy to let properties that they now wish to sell on.

There has been a significant rise recently in landlords looking to sell their rental properties because the UK government has changed the rules around tax for buy to let landlords. In the past, landlords only paid tax on the profit on their rental properties i.e. the rental income minus any mortgage payments.

However, from April 2017 the amount of mortgage payments landlords can deduct from their rental income has reduced to 75%.

This will drop a further 25% each year until April 2020, from which point landlords will pay tax on their full rental income.

This makes renting out buy to let property not financially viable for many landlords, so they are choosing to sell up instead.

Bridging loans allow them to raise the money to make improvements so they can increase the value of the property and help them make a decent profit on the sale.

How buy to let bridging finance works

Buy to let bridging loans are usually offered with loan terms from 1-18 months, although longer loan terms can be possible.

You can normally borrow comparable amounts to a mortgage and the loan will generally need to be secured on the property it is to be used for. However, you may also be able to secure the loan against an additional property in order to borrow more or get a better interest rate.

You will normally pay an arrangement fee (typically 1-2% of the capital) and interest (which may be charged monthly, or rolled-up to pay at the end of the term of finance).

Depending on the lender you may also be charged an exit fee (also normally 1-2% of the capital) when you repay the loan.

Applying for a landlord bridging loan

Bridging finance is normally only available through intermediaries such as loan brokers. This is because lenders who offer bridging loans are normally private banks and lenders or dedicated subsidiaries of high street banks, none of whom typically deal directly with the public.

You will therefore usually need to apply for a bridging loan through a bridging loan broker. It is a good idea to choose a broker who is independent and has a whole market of access – such as Fair Mortgages – so you can be confident you are being offered the very best deals available.

Find a bridging loan for buy to let property

Our free bridging loan calculator offers a quick, fuss-free way to find bridging finance for rental properties. All you have to do is plug in some basic details about your borrowing needs and personal finances to see leading deals on buy to let bridging loans from across the market.

Need a bridging loan for buy to let property? Get in touch with our friendly expert team of loan brokers using the contact form on the right or by calling 0117 313 6058.