Many landlords with empty properties need to refurbish them before finding new tenants. A bridging loan can provide finance for this.
If a landlord owns an empty property in a run-down state, they will need to spend a lot of money refurbishing the property so that they can charge higher rents to new tenants. The property can be remortgaged, but if it is not habitable in its current condition, it may be difficult to acquire a standard mortgage.
An article in the Daily Mail in April 2017 showed how a bridging loan can help. The paper looked at the case of a 60-year-old person who wanted to raised £50,000 to renovate an empty flat. They were unable to get a loan from a large high street bank for the building work.
Andrew Montlake, a mortgage broker, addressing the issue in the article, said that many small lenders and smaller building societies would provide a loan for this work, but usually their offer is conditional on refurbishment work being completed.
An alternative is a bridging loan, which can provide the necessary money to improve the property. Once the work has been completed, a standard mortgage can be used and the bridging loan repaid. There will be affordability test applied that usually require the level of rent to cover 145% of the mortgage repayments at a hypothetical interest rate of 5.5%. For a person who is 60 years old, a mortgage should be available for a period of 10 to 15 years.