In our previous Buy-to-Let Watch series, entitled “Buy-to-Let Watch Episode 6 | Why Investor Strategy is Important,” we aim to provide our readers with additional insights to contemplate, focusing on today’s title Buy-to-Let Watch Episode 7 | Bridge-to-let Fills The Gap”.

In 2025, leasing a property to a new tenant will be restricted unless the energy performance certificate (EPC) rating is C or higher. Subsequently, in 2028, this requirement will extend to existing tenancies.

Taking proactive measures to address this concern can prove advantageous for landlords. Enhancing a property’s EPC rating not only aligns with impending regulations but also has the potential to elevate property value and appeal to tenants seeking reduced energy expenses.

Many lenders incentivise borrowers who upgrade their properties to meet the mandated EPC standards. Conversely, there is a discernible shift among lenders reluctant to extend loans for properties falling short of the requisite EPC rating.

If this trend persists, it may result in a depreciation of property values, emphasising the urgency for landlords to act promptly in meeting these evolving energy efficiency standards.

Buy-to-let watch episode 7 | Some lenders are declining loans for low-EPC properties

Property investors can access lucrative opportunities by acquiring homes at lower prices and enhancing their Energy Performance Certificate (EPC) rating. Renovations play a pivotal role in increasing property value and meeting EPC standards. However, obtaining traditional Buy-to-Let (BTL) financing might not be possible if a property is deemed non-mortgageable.

In such scenarios, refurbishment bridging loans present a practical alternative for funding both EPC upgrades and broader renovation projects. These short-term loans allow investors to secure properties quickly, undertake improvements, and transition to long-term financing. For many, this means remortgaging onto a standard BTL product after completing the renovations.

Nevertheless, using bridge finance involves specific challenges. Firstly, investors often need a significant upfront deposit. Additionally, they must have sufficient funds to cover the renovation costs. Without these resources, progressing with the project becomes difficult.

Another common hurdle arises with BTL lenders’ restrictions on remortgaging. Many lenders enforce a six-month ownership period before allowing refinancing. As a result, investors may face prolonged reliance on higher-cost bridging finance, potentially eroding profits. Furthermore, delays in renovations or a lower-than-expected post-renovation valuation could complicate the transition to a BTL mortgage.

To overcome these challenges, investors must approach each project with careful planning. Budgeting accurately for both the initial purchase and renovation is essential. Additionally, researching lenders’ criteria and timelines can help investors align their plans with realistic financing options.

Strategic foresight enables property investors to navigate the dynamic UK mortgage market while maximising returns. Refurbishment bridging loans offer a flexible solution, but success hinges on understanding the risks and taking proactive measures to mitigate them.

Buy-to-let watch episode 7 | What would be really good to see is a return of some of the past products like retention BTL

Buy-to-let watch episode 7 | Many lenders now have incentives for borrowers who bring their properties up to the required EPC standard

As long as the work is completed within six months, the investor can complete the BTL offer as soon as they are ready, giving them a guaranteed bridge exit route.

As per the table below, a few other lenders offer this product type. It is worth noting that BTL lenders are open to allowing a remortgage to them after works have been completed without applying the six-month rule and providing solutions for, say, cash buyers.

This is a snapshot of some of the products available as of 21/03/22