Short term bridging & property mortgage finance explained & explored

Property that’s got potential but needs more than a “lick of paint”

Most “High Street” mortgage providers and banks that offer regulated residential mortgage products are reluctant to offer mortgages on property which is deemed uninhabitable i.e. does not have not hot & cold running water, no heating system and does not have adequate cooking facilities or a basic kitchen.

Does this mean the property can not be mortgaged or financed at all?

No matter what the current condition every property will have a value.  Professional, qualified and experienced surveyors will be able to asses its current value, the cost of bringing the property up to a basic habitable condition and the value of the property after the property has been refurbished. With these figures confirmed by an independent professional source, who will have professional indemnity to protect the lender against any serious errors, short term lenders are prepared to offer short term mortgages to enable property to be bought back to life and create a modern home or sound investment.

I am not daunted by the hard work but I’ve never done anything so big before……

If the project you are considering involves structural works, which may need expert or experienced people to oversee it, then the lender may require you to engage a “Project Manager” who will work with you to advise and guide you on the aspects which are critical to ensure the structural integrity of the property is not compromised. If the works are not so involved / complicated then the project manager will probably not be required. However, the lender will almost certainly release any agreed funding against works which you have already completed, so even if you are getting an absolute bargain, you will need some capital of your own or additional security i.e. another property.

Bridging & short term mortgages are expensive right?

Well, because there is generally greater risk with projects which require short term bridging lending the costs are pretty much always higher than a mortgage secured on a property provided by a High Street lender of bank. However, the fact you will only have the facility for 12 or 18 months means the costs are off-set against the enhanced property value or rewards. Bridging rates are constantly being adjusted and at the moment some lenders are offering rates and terms commensurate with “normal commercial” lending.

What happens when the property is complete?

When the hard work is finished, the property is habitable and the value has been increased by your hard work and efforts the property should be accepted as security for a traditional mortgage or Buy To Let mortgage, if you are renting the property out.(obviously to obtain either your circumstances would have to meet the lenders criteria at that time) Alternatively the property could be simply sold and the bridging finance repaid.