Bridge to let products are a type of financing that combine a short-term bridging loan with a pre-approved buy-to-let mortgage. They are designed to help property investors who want to purchase a property that requires some work to make it fit for letting, such as light refurbishment or renovation.

Bridge to let products have become more popular in recent years, especially as the UK property market has faced various challenges and opportunities due to the Covid-19 pandemic, the changing taxation and regulation environment, and the shifting demand of renters.

But what are the advantages and disadvantages of using bridge to let products in 2023? Here are some of the main points to consider.

Pros of Bridge to Let Products

One application process: With bridge to let products, property investors can apply for both the bridging loan and the buy-to-let mortgage at the same time, saving time, hassle and costs. They can also benefit from having one lender and one point of contact throughout the process.

Pre-approved exit strategy: One of the main risks of using a bridging loan is not being able to repay it on time or find a suitable long-term finance option. With bridge to let products, property investors have a guaranteed exit strategy, as they can switch to the buy-to-let mortgage once the property is ready to be let out.

• Value uplift: Some bridge to let lenders can factor in the value increase resulting from the refurbishment work when agreeing the terms of the buy-to-let mortgage. This means that property investors can potentially borrow more or pay less interest on their long-term loan.
• Flexibility: Bridge to let products offer flexibility to property investors who want to take advantage of opportunities in the market, such as buying properties that are uninhabitable or unmortgageable, or that need some work to maximise their rental potential.
• Market demand: Bridge to let products can help property investors meet the changing demand of renters, who are looking for larger properties outside of major cities, or properties with more outdoor space or home office facilities. By updating the housing stock in these areas, property investors can attract more tenants and achieve higher rents.

Cons of Bridge to Let Products

• Higher costs: Bridge to let products are generally more expensive than conventional buy-to-let mortgages, as they involve higher interest rates, fees and charges for the bridging loan component. Property investors also need to factor in the costs of refurbishment work and any potential delays or complications.
• Strict criteria: Bridge to let products are not suitable for every property or every investor. They usually require a minimum loan amount, a maximum loan-to-value ratio, and a clear plan for refurbishment work. They also depend on the property being habitable and mortgageable after the work is completed.
• Market uncertainty: Bridge to let products are subject to market fluctuations and risks, such as changes in property prices, rental demand, interest rates, taxation and regulation. Property investors need to be aware of these factors and how they may affect their profitability and cash flow.
• Limited availability: Bridge to let products are not widely available in the UK market, as they are offered by a relatively small number of specialist lenders. Property investors may need to use a broker or an intermediary to access these products and compare different options.

Conclusion

Bridge to let products are an innovative and flexible way of financing property investments that require some work before letting them out. They offer several benefits, such as one application process, pre-approved exit strategy, value uplift and market demand. However, they also have some drawbacks, such as higher costs, strict criteria, market uncertainty and limited availability. Property investors should weigh up these pros and cons carefully before deciding whether bridge to let products are suitable for their needs and goals in 2023.

If you are interested in a bridge to let, contact us today on 0151 662 0188 or email [email protected].