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4th August 2026 | Baya financial

Month: August 2022

How do you value mixed use properties?

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Commercial Element is nearly always a vacant value. Unless you have a blue chip company on a long lease when we can sometimes achieve a market value.

Residential Element will be valued using similar comparable properties in the area. Remember properties above commercial are usually less desirable.

If you have an HMO as part of the residential part, you may be able to achieve an uplift on the bricks and mortar with a yield-based or hybrid valuation. This is where you can benefit!

You will either end up with an aggregate value (the sum of the individual parts) or a block value for the building, where around 10% is deducted from the aggregate value.

Which figure the lender uses will be up to the valuer and their comments. Can the property be broken up and sold individually? And would there be sufficient demand to do this in 12 months?

 

Is there an alternative to bridging finance?

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If you have a property that is mortgageable, but you need to do some work in order to let it out, do you need to use bridging?

We have another option!

It works well if you are looking at a smaller refurbishment where you don’t think you’ll get enough uplift to warrant paying for a bridge.

It is also an option if you are looking for a long-term project requiring planning for example if you are can wait to start bigger works.

It allows you to buy a property where you need to carry out a light refurbishment in order to let it out.

The valuer will see the schedule of works and can take this into account when looking at the value as well as the market rent figures. This is especially important when you need a higher rental figure to make the deal work.

This can work for residential as well as semi-commercial properties where they are tired and in need of a refurbishment before you can let them out.

You can use it for existing HMOs where there is a license in place but it needs some refurbishment to attract more rent or different tenants.

We can use a desktop valuation in the majority of cases, enabling a quick completion where required.

There is a 2-year fixed with a 2-year tie-in, allowing an opportunity to reassess what you are looking to do at that point. They also have a 5-year fixed with a 2-year tie-in, offering you some more flexibility.

There are some things to be aware of, as always:

  • The property does need to be habitable in its current condition.
  • No heavy refurbishment or planning.
  • You will need to show you’ve got 3 months’ mortgage payments in the bank to cover the refurbishment period.
  • They are lending based on their current condition and value, so there’s no room for uplift at this point.

Have I got enough experience?

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Simple Buy to Lets

You don’t need any experience for this! If you own your residential property then this opens up your options, but there are still lenders for first-time buyers.

Be aware there may be a minimum income requirement, so make sure to be really upfront with your broker.

HMOs

For small HMOs (up to 6 bedrooms) we have a number of options for first-time investors.

What has changed is that we now have options not only for first-time buyers but also large HMOs for first-time investors or buyers.

These are medium-term products to allow you to gain experience in this area.

Mixed-use Properties

We now have a lender for first-time investors for simply mixed-use properties!

This is a great opportunity for investors to move into a different area, look at longer-term lets and be able to look at more properties.

The commercial element needs to be let, although we can use a bridge if we need to first.

How can leases add value to your property?

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Splitting Leases

This is one of the most common ‘tips’ you get from property mentors and courses – buy freehold flats and create leases to add value! It doesn’t always work like that, as the way lenders value property is based on how it is likely to be sold, and if that is as a block then you won’t get the uplift on a revaluation. There are, however, ways you can do this. You could look at smaller blocks, where they could be split off and sold easily.

Generally, you need to consider the size of them, demand, split utilities, and access. The ideal would also be to carry out a refurbishment or wait a period of time before refinancing them as you need the valuer to disregard the purchase price as a comparable. You can also look at splitting houses into flats; additional flats into blocks and rearranging space to create more units. These can all create value through the sale or refinance of the properties.

Extending Leases

There is a large quantity of flats around the country with short leases which struggle to sell. This is due to most people (buying property to live in) not understanding the lease extension process, as well as a need for a longer capital repayment mortgage. When you are basing your maximum mortgage on your income, and the mortgage is capital repayment, you usually need this over a long period of time (age depending!) to make it affordable. Generally, you need 55 years left on the lease at the end of the mortgage so if you have, for example, 68 years currently you could only look at a 13-year term.

The difference with an investment mortgage is that you are able to look at it on an interest-only basis. This means that the monthly payment is the same if it’s one or 25 years. You do need to find an alternative way to repay the mortgage and be aware that the full balance will remain at the end of the term, but this does give you options. You could, with the example above, take the mortgage over 13 years and in that time increase the lease length and then refinance. This could increase the value and allow you to take some money out of the property. This is a great opportunity as an investor that homeowners just don’t have.

Share of Freehold

This is another misconception among many potential homeowners. Again, they see a short lease and assume it is expensive to extend it, or they won’t get a mortgage on it. The same principle applies as above with your mortgage term, but it can be much easier to extend your lease. All leaseholders have to agree and all leases need to be extended simultaneously, but it is much cheaper than extending a standard lease.

Paying High Interest Rate To Control Valuation

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Is it worth paying a higher interest rate to have more control over your valuation?

This is a subject that I discuss frequently with clients, so I thought it deserved a spot on the grid!

When clients call me to discuss what products are available for a project, the conversation about valuation methodology is becoming more important – and as you should know by now we really aren’t a rate-driven broker so there are always options to cover this as well as the route of least resistance.

So what can you achieve from your valuation when you aren’t focused on the cheapest option?

The aggregate value for blocks of flats up to 10 units – can add 10% to your value

A commercial or hybrid valuation on small HMOs (5-6 bedrooms). We have seen again and again recently how this means you can pull so much more out of your property.

How does it work?

  • We have access to the lender’s panel of surveyors and are able to give you a few quotes for you to decide who to use.
  • Due to our experience, we are able to let you know who we have used before and our positive and negative experiences with them!
  • We can ask for a quote from a valuer you have used previously if they are on the panel.
  • You are able to call the surveyors to gauge their methodology for your property.

How does that compare to a standard lender?

  • High street and fewer specialist lenders won’t have any of these options.
  • You pay less for your valuation, in some instances, they are free (with an admin fee).
  • But you aren’t given any options, and it’s likely that Allied or Connells will carry out the valuation.
  • They are great surveyors for standard residential properties, but anything outside of that needs a more specialist company to look at their true value.

MYTH BUSTING: Barriers that don’t really exist!

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You need to own your own home, or already have a BTL to get a BTL or HMO mortgage

Yes, it makes it easier, but no you don’t need one. And if you are tight on deposit funds you need to balance out the increased rate on your BTL mortgage against the money you’d need to spend on buying something you don’t really want and then having to find more money for your next deposit.

Limited company mortgages are more expensive. 

To a point this is true, but there isn’t really much in it once you own a few properties or if you don’t have any non-property income. What’s more important is your tax position, and long-term goals so it’s always worth speaking to your accountant to get advice for your circumstances. Once we know that, it’s my job to find the mortgage for you.

Bridging isn’t worth using, it’s too expensive. 

This is something I strongly disagree with!! Yes it adds the expense to the deal, but if the numbers work then it has so many advantages – it allows a quick purchase, you don’t need planning or it is in mortgageable condition and it allows you to realize any potential uplift in value quickly.

The lowest rate is always the “best option”.

When looking at your mortgages, I would always suggest thinking about where you want to be in 5 years and working back from that point. So releasing more equity, or releasing it quicker could help. As could using a lender who is more flexible in experience. There is so much more to it than just looking at the rate, so be careful with quick comparisons, and find out the whole story.

Importance of Your Credit File

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The importance of looking after your credit file in the current market.

Lenders are being careful with who they lend, and are more cautious than normal given the situation. This is inevitable really, if there is a history of a client not paying a bill or mortgage, they are statistically far more likely to do it again, and with the current financial uncertainty, this could become something that is more likely.

Usually, we can speak to the specialist lenders we work with, and where there is a good explanation for poor credit they can look to lend. They understand that as property investors you have lots of tenants and utilities particularly can be an issue.

What we are seeing at the moment though, is that this is not necessarily the case. We are seeing some lenders formally restrict their criteria to allow fewer credit issues, as well as others who usually take a more pragmatic approach and have a blanket rule on any blemishes.

So what can you do?

  1. First of all, you should all be checking your credit search each month anyway. You can use a free company such as Credit Karma, which emails you each month with your new report. they also notify you of any changes to it. This means that if there are any issues, for example, something has gone to an old address, or direct debit hasn’t been paid then you can rectify it immediately – this should stop any future defaults.
  2. Secondly, when you approach your broker for a mortgage make sure you know if there’s anything on the search and give us the exact details of it. This means that neither of us is wasting time applying to lenders who won’t be able to help. It also means you’re not worsening the issue by adding additional credit searches to your file.

How can you future-proof yourself?

Cash flow is always key in property development and investment. It’s vital to keep on top of this, and it does nip at your heels. Especially in today’s market, you need to be building in contingencies for time and cost to ensure that this doesn’t cause any credit problems down the line.

Being realistic with your costs, timescales, and end values is also key to ensuring that things run smoothly over the next 6-12 months. Getting this wrong could impact your cash flow and credit file.

We are happy to run through figures with you on your exit, and where we are looking at a bridge we will always ensure that it fits at a conservative estimate on that exit.

 

CASE STUDY: Lenders’ Flexibility In An Uncertain Market.

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Why flexibility with your lender is so important in an uncertain market?

 

What do I mean by FLEXIBILITY?

Most lenders will tie you into a product with early repayment charges if you leave it.

The only alternative would be a tracker rate, but they are rare and expensive. And don’t offer you much certainty with the base rate on the move currently!

So, how can you get the flexibility to refinance when you need to??

Why would I need flexibility??

With an uncertain market, would you like the option to refinance and pull some more money out at a point that suits the market rather than a fixed date?

Do you want to do some work on the property, but not yet so you don’t want to put it on a bridge yet?

Is your property tenanted so you can’t complete work until some point in the future?

How does it work?

We have a lender who will allow you to refinance with them at any point and they will waive the early repayment charges.

They will offer a new product, with a reduced arrangement fee and legal, but a new valuation (the one thing you need!)

This allows you true flexibility when you choose to refinance, and you can move to and from a bridge to carry out work at a much lower cost.

 

As an example…

A client bought a property to convert to a 6-bedroom HMO with a bridge (before they knew about us!)

They refinanced to a term mortgage with a yield-based valuation in December 2020 when the market was so uncertain and valuations weren’t the best! The value was £570,000 (in Bath)

They are currently refinancing now that valuations are more positive and we have just got the new figure of £695,000.

We lent 75% of both figures, so that’s over £90,000 released for another project!

Bridging vs Standard Mortgage

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How does bridging differ from a standard mortgage?

I am often asked what the benefits of bridging are, and you all know I’m a big fan!

But…..

How does bridging differ from a standard mortgage?

and how does that help with your next deal??

Lenders do not assess the mortgage on affordability

This means that it doesn’t matter what the rent would be for the property in its current condition, they won’t restrict how much you can borrow based on that figure.

For example…

If the property is in poor condition, the valuer will give a lower figure of say £600 pcm. When it is refurbished you may be able to rent it for £800, but the £600 may not be enough to borrow the full amount.

The Legal Process is much quicker.

The lender’s requirements for searches and documents from your solicitor are so much smaller than a standard purchase so we can often complete quicker than even a cash purchase, where you would usually want full searches.

The property can be in any condition, as long as you have a plan that works!

You don’t need a kitchen or bathroom, there can be structural issues, and dampness… the list is endless!

As long as you have a plan for the works, the funds to do them (and some experience if they are extensive) then we can do it.

This will open up the properties available to you, you aren’t competing with everyone else.

The property is appraised on your schedule of works and costings

We provide the valuer with your schedule and costs of work, so you will get the current figures, as well as post works figures.

You will have a guide for the GDV and rental potential once it is completed. This will give you some certainty over your project and whether it is viable.

If you are happy with the figures we can usually use the same valuer for the survey for the exit.

If you would like to have a chat about your project and how bridging could help then please give me a call or drop me a dm…

Maximizing Bridge Loan by Borrowing More Than 75%

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How can you maximize your bridging loan by borrowing more than 75%?

I’ve spoken about the benefits of using bridging, 

But how do you ensure you are borrowing the maxmum amount so you are putting in the least amount possible?

We can lend 85% of the purchase price on day one

This is the simplest way to give you some extra funds to purchase the property.

There are some caveats as usual!

  • The gross loan needs to be under 75% of the GDV
  • 10% of the loan needs to be for the works so there needs to be at least that much to spend.
  • Works need to be light, so no structural or change of use.

We can lend you all the costs for the work.

This is more complicated, particularly at the moment.

Lenders are moving the goal posts and increasing their minimum loan sizes so please check with me before you make any assumptions on figures.

As a general rule we can lend up to 65% of the GDV, with all works covered (in arrears) so whatever is left from the total loan is your day one loan (minus fees and interest)

We can lend 75% of the open market value on day one

This is seen as the unicorn product, as it all depends on your figures!

You need to be confident that you are purchasing a property under full market value, but we do see it quite often

We can lend up to 75% of the open market value, and up to 90% of the purchase price

This is a great way to maximize your loan with no additional costs.