Advise on strategy

[Moe K]

Hello All, 

Initially I wanted to go down a bridge loan and get 75 or 100% LTV to do BRR under a LTD as I did not want to remortgage my encumbered property that I paid off,  After speaking to a broker he advised i am better remortgaging  and releasing the money instead of using a bridge loan, But the interest rate over 2 year fixed is around 6.49% 

What do you advise?  should I use a bridge? should I wait for the rates to settle? considering there is lots of market uncertainty low offers are likely to get accepted as the banks have pulled out many deals. 

Regards,

Moe

 

[Stuart Phillips]

The two factors that matter most here is the exit, and the timescale involved.

Bridging loans are expensive, but are month by month, so if the work can be done quickly, that might still end up cheaper than fixing for 2 or even 5 years on your residential. Bridging rates havent jumped in the same way because they are short term loans and therefore they dont need to consider your long term ability to support the loan, nor do they need to secure those funds from the 'market' long term. They only care about the value will add and the chance it will sell or refinance in time to repay them.

If you know the extent of the work (Light refurb - non stuctural - 0.75%, heavy refurb - structural alterations or redevelopment - 1.00%, changing use, resi to HMO for example - 1.5%), the time you think it might take and then look at the total cost of a bridge. Compare that to the total cost of a 2 year residential mortgage at 6.49% and you will have our answer, something your broker should have already spelled out to be honest.

The above rates are just estimates, fee's vary wildly and can be a huge expense, maybe £4-6k ontop for lawyers, valuations, admin fee's etc.

 

[Moe K]

3 hours ago, Stuart Phillips said:

The two factors that matter most here is the exit, and the timescale involved.

Bridging loans are expensive, but are month by month, so if the work can be done quickly, that might still end up cheaper than fixing for 2 or even 5 years on your residential. Bridging rates havent jumped in the same way because they are short term loans and therefore they dont need to consider your long term ability to support the loan, nor do they need to secure those funds from the 'market' long term. They only care about the value will add and the chance it will sell or refinance in time to repay them.

If you know the extent of the work (Light refurb - non stuctural - 0.75%, heavy refurb - structural alterations or redevelopment - 1.00%, changing use, resi to HMO for example - 1.5%), the time you think it might take and then look at the total cost of a bridge. Compare that to the total cost of a 2 year residential mortgage at 6.49% and you will have our answer, something your broker should have already spelled out to be honest.

The above rates are just estimates, fee's vary wildly and can be a huge expense, maybe £4-6k ontop for lawyers, valuations, admin fee's etc.

 

Thanks Stuart, I guess that answered my question, I will perhaps use bridge loan once I have more experience and I can estimate and factor all the costs to a closer degree.