Like many landlords, you may have decided to purchase an uninhabitable property using a bridging loan facility, with the intention of doing a “tart and turn”. Nothing too difficult; new kitchen, bathroom, bit of decor and you end up adding two or three pounds of value, for every pound that you have spent doing it up.
That must be good business?
When you set out in the “re-furb” business, you were undecided as to whether to sell on immediately or retain as a long term investment, producing capital growth and income.
Now you have successfully completed the project and having spoken to a local letting agent, you decide that it would be best to retain the property. However, not as a Buy to Let, rather as a Holiday Let. After all, you live in a tourist area, and can do the “meet and greet”, laundry changes and other hands on stuff yourself. You know that this will have the effect of reducing the agent’s management charge, to no more than the charge rate of the average buy to let investment property. The rent, however, is much more attractive than a buy to let, so it looks like you are in the money!
After speaking to your bank about a Holiday Let Mortgage, and being told that they “don’t do those”, you trawl the internet and find a couple of good little Building Societies that advertise Holiday Let Mortgages.
You give them a call to discuss and they like the sound of you, the property and the projected holiday rental income. They ask you how long you have owned the property, and its over six months, which is a rule that lenders have, in terms of the minimum period before that you must have owned for, before they will take on a re-mortgage case. You are almost home and dry. However the last question that they ask you is, are there currently any loans secured against the property. You tell them, yes there is a bridging loan in place, because when you purchased the property it was not in a habitable state and no high street lender would make an advance.
At this point, they say, we don’t take out bridging finance. You ask why and they tell you that bridging finance is for business purposes, which takes you aback, as you thought that buy to let and Holiday Let finance was really commercial finance? Apparently not, and the conversation ends.
Well, you are not alone; many mainstream lenders have come up with spurious reasons, not to lend in remortgages cases that involve a bridge. This is the case for both Holiday Let and Buy to Let properties
If you find yourself in the position we have detailed here, we may be able to offer you help with a long term finance exit.
Please call us today on 0800 840 3111