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BTL landlord uses bridging finance to add to portfolio

With many landlords finding it harder to secure a mortgage since the Prudential Regulation Authority’s changes were introduced last year, some buy-to-let investors are turning to less conventional forms of finance in order to carry on investing in the buy-to-let market, especially when buying property under the hammer.

Bridging finance, for instance, known for its speed, offers much faster time to completion than high-street lenders, which is mainly why this form of short-term finance is growing more popular with property investors, including landlords looking to add to their portfolios.

The speed at which bridging finance can be implemented is the main reason for its use, according to Shawbrook Commercial Mortgages.

Shawbrook, with its broker partner Baya Financial, has just launched a ‘Lending for Refurbishment Costs’ product offering borrowers access to 100% of refurbishment costs on short-term projects, which one BTL landlords has already taken advantage of.

The investor recently bought a property at auction for £494,000, which required freeholder consent and a lease extension.

In addition, works were also required, at an estimated £49,400, to allow internal reconfiguration of the rooms, moving the kitchen and bathroom to the ground floor, along with loft insulation, new flooring and decoration.

The investor successfully secured the funds through Shawbrook within 28 days, enabling him to move forward with the deal, at a rate of 0.8% a month.  

Unlike many providers, the 1.95% arrangement fee for this product was added to the loan which placed the customer at 86.95% loan-to-value (LTV) on completion.

Funds for the works were released immediately and allowed the investor to carry out the necessary works in time to secure a monthly rental income of £1,600 and add this property, now with a GDV of £650,000, to a growing portfolio.

In addition to borrowing 75% against the lower of day one purchase price or value, Shawbrook’s Lending for Refurbishment Costs option allows applicants to borrow up to 100% of the refurbishment costs on a single larger facility for light refurbishment projects across residential and semi-commercial security.

In this case, all funds were provided on day one with no staged drawdown required. In this instance, a larger gross loan of £429,533 allowed the borrower to both purchase the property and complete the refurbishment project.

Gavin Seaholme, head of sales at Shawbrook Commercial Mortgages, said: “This new short-term product addition is rapidly becoming a key string to the experienced property investors bow, allowing them to generate value and build their portfolio.

“We are delighted to expand access to this product feature across the entire Shawbrook Broker panel and look forward to seeing this help investors with their short term property ambitions.”

Eleanor Broadhurst from Baya Financial added: “We have worked with Shawbrook for many years and have always liked their way of operating; they understand how investors work which is key to us as a broker. 

“We were really excited to see that they had this new product and were keen to offer this new and innovative solution to our clients, allowing them to access more borrowing in order to build and grow. We have been really pleased as it is as easy to use as their other products.”

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