Our newly-experienced client wanted to move into the refurbishment space to diversify his property portfolio. With the idea to purchase an unlettable property and uplift its value and EPC rating, our client planned to let this out as a standard buy to let. Requiring substantial funding on a bridging loan, read on to find out how we secured the mortgage offer.
At a glance:
- Experienced landlord looking to finance their first refurbishment project
- Bridging finance to purchase and refurbish unlettable property
- Three-bedroom end-of-terrace house with an EPC rating of an F
The Case:
Having purchased their first investment property a year before, our client wanted to diversify into the refurbishment market and renovate an investment opportunity.
The plan was to purchase an unlettable property through their established Limited Company with bridging finance, refurbish it to uplift the value and then exit the bridge with a refinance onto a standard buy to let mortgage.
The property in question is a three-bedroom end-of-terrace house in serious need of some TLC. In a quiet, residential area, the property promised to be a great asset to our client's portfolio as a buy to let.
The Challenge:
The key challenge was the property’s EPC rating. At an F, not only did the property not meet the minimum legal requirements for letting to tenants, but most lenders won’t offer to properties at this rating. Furthermore, our client needed to secure maximum borrowing to complete all the necessary works, which made finding a lender challenging.
Given the property's condition, we knew we had to approach a specialist lender who would take a view on the case. Our team of experts is highly experienced in complex bridging cases, so our next steps were simple. We worked with our client to put together a clear and costed schedule of works showing the lender exactly how the property would be refurbished and how the EPC rating would increase. This reassured the lender of the case's stability and highlighted the experience of both our brokers and the client.
Not only was the lender happy to proceed, but the client was able to borrow up to 85% of the property’s market value in its current condition.
The Finance:
Initial property value: £130,000
Projected post-refurbishment value: £210,000
Loan amount: £110,499
LTV: 85%
Rate: 0.94%, 1-year fixed*
Term: 1 year, interest-only
Lender arrangement fee: 2% arrangement fee
Monthly rental income: £2,000 (estimated upon completion of works)
*Rate as at April 2024.
Next steps
For further information on financing renovations you might find our Guide to Financing Home Renovations blog useful.
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