Bridging Loans for Unmortgageable Properties

Most mortgage lenders only lend on properties that are habitable and built using standard construction methods. When a property falls outside those criteria, lenders usually class it as unmortgageable.

However, that does not mean the opportunity disappears.

At GPS Financial, we arrange specialist bridging loans for unmortgageable properties. This type of finance allows you to purchase, refurbish, or redevelop a property before moving onto a longer term solution such as a Buy to Let mortgage or a sale.

In practice, we arrange bridging finance from £25,000 up to £25 million. Terms typically run for up to 12 months, although this depends on the property, the works required, and the strength of the exit strategy.

When Is a Property Considered Unmortgageable?

A property may become unmortgageable for several reasons, even when demand and resale potential remain strong.

Common examples include:

• Properties not fit for human habitation
• Significant structural issues or serious disrepair
• Non standard construction materials
• Mixed use or part commercial buildings
• HMOs or complex internal layouts
• Short lease lengths
• Buildings requiring extensive refurbishment before occupation

In many cases, these issues are temporary. Once you complete the necessary works, the property may then qualify for standard mortgage finance.

How Bridging Finance Supports Unmortgageable Properties

Because bridging finance moves quickly, it works particularly well for properties that lenders cannot mortgage in their current condition.

Borrowers commonly use bridging loans to:

• Bring a property up to habitable condition
• Replace or remediate non standard construction
• Complete structural repairs or layout changes
• Convert or reconfigure mixed use buildings
• Renovate HMOs or multi unit properties

After works complete, borrowers usually repay the bridging loan through refinance or sale, depending on the original plan.

Example: Bridging Finance for an Unmortgageable Property

A client approached GPS Financial to purchase a residential property that had sat vacant for several years and did not meet habitable standards. As a result, mortgage lenders declined the property at the point of purchase.

We arranged a short term bridging loan to fund both the purchase and the refurbishment works. We structured the loan over a 12 month term and rolled up the interest. This approach removed the pressure of monthly repayments while the client completed the works.

Once refurbishment finished, the lender revalued the property. The client then refinanced onto a standard Buy to Let mortgage and repaid the bridging loan in full.

Types of Unmortgageable Properties We Can Fund

Specialist bridging lenders offer far more flexibility than mainstream banks. As a result, they regularly consider property types that traditional lenders decline.

These include:

• Derelict or semi derelict buildings
• Properties requiring full refurbishment
• Non standard construction homes
• Mixed residential and commercial properties
• HMOs and multi tenancy buildings
• Properties purchased at auction

If a mortgage lender has declined a property due to condition, structure, or layout, bridging finance may still provide a workable solution.

How Much Can You Borrow?

Borrowing levels depend on several factors, including:

• The current and future value of the property
• The scope and cost of the works
• The deposit or equity available
• The credibility of the exit strategy

In many cases, lenders offer between 70 percent and 85 percent loan to value. This varies based on property type and deal structure.

Above all, the exit strategy matters most. Lenders assess whether a refinance or sale is realistic and achievable within the agreed term.

Costs to Consider

Bridging loans cost more than standard mortgages. This reflects both the short term nature of the finance and the increased risk involved.

Costs may include:

• Interest charged monthly or rolled up
• Arrangement fees
• Valuation fees
• Legal fees
• Exit fees on some products

For that reason, you should always review the total cost of borrowing rather than focusing only on the headline rate. Your exit strategy must comfortably cover full repayment.

Why Use GPS Financial?

GPS Financial specialise in complex property finance, including bridging loans for unmortgageable properties. We work with lenders who actively fund projects that fall outside standard mortgage criteria.

From the outset, we focus on the property, the works required, and a realistic exit strategy. As a result, we structure funding that supports the project rather than creating unnecessary pressure.

In 2022, GPS Financial won Best Firm: Bridging & Commercial, awarded by Dynamo for Intermediaries, one of the UK’s leading mortgage clubs.

For guidance on construction standards and property condition, see the Royal Institution of Chartered Surveyors

Speak to GPS Financial

If you are considering a bridging loan for an unmortgageable property, speak to the team at GPS Financial.

We will assess the property, confirm whether bridging finance fits your situation, and structure the loan around your timeline and exit strategy. As a result, you gain clarity before you proceed.

Call 029 2267 7707 or visit our Contact page to arrange a no obligation discussion