Hope-Refurb-Loan-2

Bridging

How bridging can help landlords meet the new energy performance standards.

Hope-Jonathan-2

by Jonathan Sealey

The new standards around energy efficiency, known as the Minimum Energy Efficiency Standards (MEES) came in on April 1st and state that any property in England or Wales that now achieves an F or a G rating can no longer be let to new tenants. As a result of the new standards, many lenders will not lend to landlords with a property that does not meet the EPC ratings – even if the borrower has had the property for some time and just needs a remortgage.

Hope-Refurb-Loan-2

This therefore poses a challenge for many landlords looking to renovate; how do they fund the costs of getting the property to the standard it needs to reach if they can’t get the funding? If long term lenders won’t lend, the landlord may struggle to fund the work that needs doing to bring it up to the right standards, and until the standards are met, they won’t get funding – a bit of a catch 22.
 
Bridging can be the perfect solution in this scenario – funding the energy efficiency works over a short term, and often improving the value of the property as well, enabling the borrower to then get a long term mortgage, often at a lower loan to value.

"We are starting to see a real upsurge in borrowers taking out bridging loans in order to fund energy efficiency work, and then remortgage back onto a longer-term mortgage once the building achieves the required rating."

Jonathan Sealey, CEO

For example, we had a client come to us who had found a huge site which was home to a large manor house and a number of out-houses. The intention was to renovate the manor house and bring all the out-houses to a high standard for rental.
 
The client wanted to go straight on to a term loan, however, the property had an EPC rating of G, and so she couldn’t get the funding she needed. The client’s broker approached a number of lenders, but time was of the essence as the client had agreed to complete the purchase of the site within two weeks.
 
The client owned a large, successful estate agency, had a wealth of experience with property and a sizeable portfolio and was confident in the property’s potential. So Hope Capital were happy to carry out a valuation and offer a bridging loan which allowed her to complete the deal within 48 hours.

Hope-Refurb-Loan-1

And this is by no means the only example – we are starting to see a real upsurge in borrowers taking out bridging loans in order to fund energy efficiency work, and then remortgage back onto a longer-term mortgage once the building achieves the required rating.
 
Funding for development for buy-to-let projects is now one of the most popular uses for bridging finance, and with so many older buildings perfect for renovation, but unlikely to meet the EPC standards, I expect the use of bridging loans for this type of project continue to rise.

Hope-Jonathan-2

Jonathan Sealey

Jonathan started Hope Capital in 2011 after working in property for over 9 years and is responsible for the company’s strategic growth.

View Profile

Keep up-to-date with the latest company news and industry insights.