Choosing Between Bridging Finance and Buy-to-Let Mortgages

The question of whether to opt for bridging finance or a buy-to-let mortgage arises frequently. The answer, however, hinges entirely on individual circumstances. Below, we outline key considerations for each option to guide potential buyers in the right direction:

Bridging Finance:

•      Offers rapid completion, comfortably fitting within a 20-day auction timescale when all parties are actively engaged.
•      Allows for light or heavy refurbishments to the property.
•      Can fund necessary works if required.
•      Suitable for purchasing unhabitable or unmortgageable properties (look for “cash buyers only” in property sales particulars).
•      No immediate income generation from the property is necessary.
•     Allows quick refinancing without early repayment charges.

Buy-to-Let Mortgage:

• Generally, features lower interest rates compared to bridging finance.
• Lenders assess the property’s rental income to determine borrowing capacity, assuming income from day one.
• Major works beyond routine maintenance usually require prior lender consent.
• Property must be in a lettable condition at the time of purchase.

For those planning to acquire and refurbish a property for long-term ownership, bridging finance is likely the most suitable solution. It ensures swift acquisition, maintains favour with lenders, and facilitates capitalising on increased property value without early repayment penalties.