Bridging Loan for Property Refurbishment
Why use bridging loans for property refurbishment
Bridging loans are generally used for property refurbishments because the property in question is unmortgageable, or because the current owner wants to raise extra money on top of an existing mortgage to renovate the house and sell it on.
This approach has become increasingly popular recently with buy to let landlords due to changes in the way tax relief is applied to their income. Previous buy to let landlords only paid tax on their profits i.e. their rental income minus the interest on their mortgage.
However, in April 2017, the amount of mortgage interest landlords could deduct for tax purposes was reduced to 75%. This will decrease a further 25% each tax year until April 2020, when landlords will be required to pay tax on their full rental income.
Many landlords are therefore choosing to renovate their buy to let properties and sell them on with bridging loans being a popular way to fund the improvements. This is because it is relatively quick and simple to get a bridging loan, even when other forms of borrowing are not available.
How to get property refurbishment bridging finance
To get a bridging loan to renovate a property, you will generally have to apply through a bridging loan broker. This is because bridging loans are normally only offered by private banks and lenders and specialised subsidiaries of high street banks, none of which tend to deal direct with the public.
To get the best deal on your bridging loan, it is highly recommended that you choose an independent bridging loan broker with access to the whole of the market. This means you will have the widest choice of available lenders and deals, giving you a better chance of finding a deal that works for you.
The cost of bridging loans
There are three main costs associated with bridging loans:
- Arrangement fees (generally 1-2% of the total capital, paid when the loan is taken out)
- Interest (paid monthly or rolled-up and paid when the loan term ends)
- Exit fees (not charged by all lenders)
Interest and fees vary from lender to lender, so be sure to carefully compare both so you are completely clear about which deals offer the best value.
Find a bridging loan for property refurbishment
Need fast finance for a property refurbishment? Our free bridging loan calculator lets you find the most affordable deals from all the leading lenders, quickly and with minimal hassle.
To use the calculator, simple click on the link and put in some basic details about your borrowing needs and financial situation. We will them show you the best deals currently available so you can make an informed choice.
Need a bridging loan for property refurbishment? Get in touch with our friendly expert team of loan brokers using the contact form on the right or by calling 0117 313 6058