Imagine uncovering a hidden gem in the property market – a place with immense potential but deemed unmortgageable by traditional lenders.

Written by Jamie Gillispie

It might seem like a roadblock, but for savvy investors, it’s a golden opportunity. These seemingly problematic properties can be transformed into profitable assets with the right strategy: bridging finance.

In this blog post, we’ll unlock the secrets of what makes a property unmortgageable and reveal how bridging finance can help you snap up these properties at bargain prices. We’ll guide you through renovating them, securing a standard mortgage at a higher valuation, and recycling your cash for your next big investment. Get ready to turn challenges into opportunities and make the most of your property investments!

What Makes a Property Unmortgageable?

Unmortgageable properties are those that do not meet the strict criteria set by traditional mortgage lenders. This can be due to a variety of reasons, including:

1. Structural Issues: Properties with significant structural damage or defects, such as subsidence or severe damp.
2. Incomplete Construction: Buildings that are not habitable or are mid-renovation.
3. No Bathroom or Kitchen: Properties lacking essential facilities like a functioning bathroom or kitchen.
4. Short Lease Terms: Properties with lease terms considered too short for standard mortgages.
5. Non-Standard Construction: Buildings made with unconventional materials or methods that are not widely accepted by lenders.
6. Planning and Legal Issues: Properties with unresolved legal issues, such as lack of proper planning permissions or ongoing disputes.

Bridging Finance: The Key to Unlocking Potential

Bridging finance is a type of short-term loan designed to ‘bridge’ the gap between the purchase of a property and its future refinancing or sale.

Here’s how it can turn unmortgageable properties into profitable investments:

1. Acquiring the Property: Bridging loans are quicker and easier to secure than traditional mortgages. This makes them ideal for purchasing unmortgageable properties at a reduced price. 
2. Renovation and Adding Value: With the property secured, you can address the issues that made it unmortgageable. Whether it’s structural repairs, completing construction, installing essential facilities, extending the lease, or resolving legal problems, the goal is to make the property eligible for a traditional mortgage.
3. Refinancing at a Higher Valuation: Once the necessary work is completed, the property’s value will likely increase significantly. You can then apply for a standard mortgage based on this higher valuation, using the proceeds to pay off the bridging loan.

The Benefits of Bridging Finance

• Speed and Flexibility: Bridging loans can be arranged quickly, allowing you to act fast on property deals.
• Access to Unmortgageable Properties: Enables you to purchase properties that would be impossible to finance with a standard mortgage.
• Potential for High Returns: Buy at a reduced price, add value through renovations, and achieve a significant increase in property value.
• Cash Recycling: Once refinanced with a standard mortgage, the funds used for the bridging loan can be repurposed for other investments.

Conclusion

Bridging finance is a powerful tool for property investors looking to capitalise on unmortgageable properties. By using this short-term financing option, you can acquire properties at a reduced price, enhance their value through renovation, and then secure a standard mortgage at a higher valuation. This strategy maximises your return on investment and allows you to recycle your cash, enabling continuous growth and further investment opportunities.

At Elleah Property Finance, we are here to guide you through every step of this process, ensuring you make the most of your property investments. Contact us to discuss!