Buy-to-let watch episode 7
Our previous “Buy-to-Let Watch Episode 6 | Why Investor Strategy is Important,” provided readers with valuable insights. Today, we focus on “Buy-to-Let Watch Episode 7 | Bridge-to-let Fills The Gap.”
In 2025, landlords must lease properties with an energy performance certificate (EPC) rating of C or higher. This requirement will extend to existing tenancies by 2028.
Addressing this concern proactively can be advantageous for landlords. Improving a property’s EPC rating aligns with upcoming regulations. It also increases property value and attracts tenants looking to reduce energy costs.
Many lenders now offer incentives to borrowers upgrading properties to meet the mandated EPC standards. Conversely, there is a noticeable shift among lenders reluctant to extend loans for properties falling short of the required EPC rating.
If this trend continues, it may lead to a depreciation of property values. Therefore, landlords must act promptly to meet these evolving energy efficiency standards.
Buy-to-let watch episode 7 | Some lenders are declining loans for low-EPC properties
Property investors can seize opportunities by acquiring affordable homes and renovating them to improve their Energy Performance Certificate (EPC) ratings. However, securing traditional Buy-to-Let (BTL) lending might be impossible if the property isn’t mortgageable.
Refurbishment bridging loans offer a suitable alternative for EPC improvements and renovation projects in such cases.
Bridge finance allows investors to buy a property, renovate it, and transition to a long-term BTL mortgage through remortgage. Nevertheless, this approach has its own challenges. A larger upfront deposit is often required, along with the cash needed to fund the renovation work.
Several BTL lenders restrict remortgaging within the first six months of the initial purchase. Consequently, investors may face higher bridging costs for longer than necessary. Complications can also arise if the renovation extends beyond the planned timeline or the property’s post-renovation valuation is lower than expected.
Therefore, careful consideration and strategic planning are crucial for investors to navigate these challenges and maximise their returns in the dynamic property market.
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 | Expanded Offerings by Octane: Octane, traditionally a bridge-only lender, now offers a buy-to-let (BTL) mortgage for up to five years. This approach combines bridge financing benefits, offering up to 75% of the purchase price on day one with a pre-agreed BTL term loan.
This dual-product strategy ensures readiness for immediate action after completing property renovations. Octane uses the same valuer and solicitor for both bridge and BTL products, streamlining the process. While the BTL term extends to five years, Octane also lends to expatriates.
Buy-to-let watch episode 7 | Precise’s Innovative Refurbishment BTL: Another notable player in the ‘bridge-to-let’ market is Precise, with its refurbishment BTL product. A standout feature is eliminating uncertainties around post-work property valuation. Precise conducts two valuations on day one.
The proposed work schedule determines the post-work value, subject to a quick re-inspection upon completion. Adding to the speed, Precise issues two mortgage offers on the same day, simplifying the financing process for investors.
Buy-to-let watch episode 7 | Conclusion: These innovative ‘bridge-to-let’ options signify a positive trend in real estate investment. Octane and Precise, among other lenders, are reshaping the market with strategic solutions addressing investors’ challenges.
Streamlined processes and expanded niches contribute to the overall growth and diversification of financing options for property investors.
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
What would be really good to see is a return of some of the past products like retention BTL. Rather than using bridge finance, a term BTL was offered on day one with a ‘retention’ for the difference in value due to the work needed. The retention was released as soon as the work was done and evidenced.
We understand that some lenders already have plans for more options like this, which is great. Clearly, we will need as much innovation as possible as the new EPC rules get closer.
We’ve reached the end of our series on “Buy-to-Let Watch Episode 7 | Inspiring Bridge-to-let Fills The Gap.” Until next time, stay “Connect!”