Landlords can enhance rental returns with a unique buy-to-let strategy focusing on refurbishment before leasing. This innovative approach pairs short-term bridging finance for renovations with a seamless transition to a long-term buy-to-let mortgage. The long-term loan is based on the property’s value after refurbishment, ensuring a smooth process for landlords.
Using the same solicitors for both loans reduces legal expenses, simplifying the transition from bridging finance to a mortgage. The initial mortgage rate remains fixed upon completion, provided the refurbished property meets the expected valuation. This assurance offers financial stability for landlords.
This comprehensive strategy boosts rental yields and delivers financial predictability throughout the investment process. By combining efficient renovation funding with secure long-term financing, landlords achieve greater peace of mind and optimised return.
How refurbishment buy to let works | The Scenario
A representative of two first-time buyers contacted a broker. They plan to purchase a three-bedroom, end-of-terrace property through an auction. This property requires minor refurbishment to be prepared for rental purposes.
The buyers informed the broker about their renovation plans. They intend to manage most of the work, including installing a new bathroom and kitchen. They will handle decorative improvements and fit new internal and external doors. Their hands-on approach helps them save costs while ensuring the work meets their standards.
Using the same solicitors for the bridging loan and the long-term buy-to-let mortgage significantly reduces their expenses. This strategy saves time and simplifies the process for the buyers.
The broker’s guidance lets buyers streamline their refurbishment and financing plans. This collaboration ensures the property becomes a cost-effective and tailored buy-to-let investment. By focusing on efficient strategies and effective communication, the buyers and broker work together to achieve the best results in the UK mortgage market.
How refurbishment buy to let works | The Solution
In refurbishment buy-to-let, a strategic approach allows clients to accumulate interest during property upgrades. This solution enables borrowers to maximise cash for necessary improvements, making property enhancement more accessible and practical.
A bridging finance loan is offered after evaluating the applicant’s financial stability. The assessment ensures they possess adequate income and minimal unsecured debts. This tailored loan includes rolled-up interest totalling £78,649, with a favourable 65% Loan-to-Value (LTV) ratio. The ratio is calculated against the auction purchase price of £121,000.
Additionally, this financing model stands out by allowing borrowers to include extra fees within the LTV limit. For example, £583.10 is added for the facility or product fee, a £25 telegraphic transfer fee and a £295 administration fee. At the same time, customers prefer to pay the £550 valuation fee and £840 legal fees upfront, minimising additional borrowing costs.
The application process is designed to be efficient, with approvals typically completed in under two weeks. Legal checks and property valuations are finalised during this period, ensuring a smooth process. The expected post-refurbishment market value of the property reaches £135,000, with a rental income potential of £650 per month.
This approach demonstrates how financial flexibility integrates seamlessly with property improvements. Clients achieve an effective and efficient buy-to-let investment strategy by aligning strategic lending with refurbishment goals.
The here some helpful links:
- Illustrative example: How refurbishment Buy to Let works
- Try the Precise Mortgages calculator
- View product information
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