In 2025, it will no longer be possible to let out a property to a new tenant if the energy performance certificate (EPC) rating is not C or above. In 2028, the same will apply to existing tenancies.

By addressing the issue now, landlords will potentially benefit from raising their property value and attracting tenants with the offer of lower energy costs.

Many lenders now have incentives for borrowers who bring their properties up to the required EPC standard. However, we have also started to see lenders decline to lend on a property with a low EPC rating. If this trend were to continue, it could have the effect of decreasing the value of these properties.

Some lenders are declining loans for low-EPC properties

Property investors could take advantage by buying these homes at a reasonable price and completing the work required to raise the EPC rating. However, traditional BTL lending will not immediately be available if the property is not mortgageable. Refurbishment bridging suits this type of purchase and works just as well for other renovation work, not just improving EPC ratings.

Investors can use bridge finance to buy the property, complete the work and then remortgage to a term BTL mortgage. However, this has its downsides. A larger deposit is usually needed, plus the cash to do the work.

Many BTL term lenders do not allow a remortgage within six months of the original purchase date, meaning more months on the higher bridging cost than are perhaps necessary. There have also been issues where work took longer than planned, or the property did not value as expected when the work was complete.

What would be really good to see is a return of some of the past products like retention BTL

Fortunately, more lenders with ‘bridge-to-let’ products are coming to the market. These are specific refurbishment finance products that hope to address some or all of these issues.

Octane, for example, traditionally a bridge-only lender, has a BTL mortgage of up to five years. It combines its two products to offer bridge-to-let, with a bridge on day one up to 75% of the purchase price; at the same time it agrees to the BTL term loan so it is ready to go as soon as the work is complete. Using the same valuer and solicitor for both products eases the process. While the BTL is for a maximum five-year term, there are many other niches, such as lending to ex-pats.

Precise’s refurbishment BTL is another popular bridge-to-let product. It removes the question mark over the post-work value of the property by getting two valuations on day one, with the post-work value based on the proposed work schedule and subject only to a quick re-inspection when the work is done. There are also two mortgage offers issued on day one.

Many lenders now have incentives for borrowers who bring their properties up to the required EPC standard

As long as the work is completed within six months, the investor can complete on the BTL offer as soon as they are ready, giving them a guaranteed bridge exit route.

A few other lenders offer this type of product, as per the table below. It is worth noting which BTL lenders are open to allowing a remortgage to them after works have been completed without applying the six-month rule, providing solutions for, say, cash buyers.

This is a snapshot of some of the products available as of 21/03/22