How do I use a revolving credit facility to bridge the gap during a remortgage?

How do I use a revolving credit facility to bridge the gap during a remortgage?

For UK property investors, timing is everything. When you are in the middle of remortgaging a buy-to-let (BTL) property, you may find yourself facing a frustrating financial gap. Perhaps you need to carry out urgent refurbishments to unlock a higher property valuation, or maybe a new investment opportunity has appeared at auction before your current remortgage has completed.

Traditionally, landlords have turned to expensive bridging loans or slow equity release processes to solve these timing mismatches. However, a secured Buy-to-Let revolving credit facility offers a modern, flexible alternative. Acting like a property-backed overdraft, this facility allows you to draw down funds, pay them back, and draw them again as your portfolio needs change.

Promise Money is an FCA-authorised broker (Ref: 681423), not a lender. We help landlords navigate these options to find the right financial products for their portfolios. If you would like to discuss your options, you can call us on 01902 585020.

Understanding the BTL Revolving Credit Facility

Before exploring how to use this tool during a remortgage, it is vital to understand what this product is. This is a secured financial facility. It is secured as a second charge against your existing residential buy-to-let property, sitting safely behind your first-charge mortgage.

This is not an unsecured business loan, a credit card, or a generic commercial line of credit. Because it is secured against physical property, it typically offers access to larger sums of money and more competitive rates than unsecured alternatives.

The key benefit is flexibility. Once the facility is arranged, you can typically draw down funds within 24 to 48 hours. Most importantly, interest is only charged on the money you actually draw down, not on the entire facility limit. This makes it highly cost-effective for short-term bridging needs.

The Remortgage Gap: Why Landlords Face Funding Delays

A remortgage gap usually occurs in one of two ways:

• The Refurbishment Gap: You want to remortgage a property to release equity, but you need to upgrade it first. Improving the property’s Energy Performance Certificate (EPC) rating or updating the kitchen could significantly boost its valuation. You need cash to do the work, but you cannot get the cash until the remortgage completes.
• The Transaction Gap: You have agreed to buy a new property (perhaps at auction) and need to pay a deposit quickly. You plan to use equity from an upcoming remortgage on another property, but the legal paperwork is delayed, putting your purchase at risk.

In both cases, a secured revolving credit facility can act as the perfect bridge. You can view guidelines on property standards and landlord obligations on MoneyHelper, which highlights why keeping your properties updated is so important for long-term value.

Step-by-Step: How to Use the Facility to Bridge the Gap

Using a revolving credit facility to bridge your remortgage gap is a straightforward process when structured correctly:

1. Arrange the facility in advance: Set up your secured revolving credit facility against one or more of your existing BTL properties. Because it costs nothing or very little to keep open when undrawn, it is wise to have this in place before you actually need it.
2. Identify the gap: When you need to fund a refurbishment or secure a new property deposit, calculate the exact amount required.
3. Draw the funds: Request a draw-down from your facility. This is typically processed in 24 to 48 hours, placing the cash directly into your bank account.
4. Complete the work or purchase: Use the funds immediately to pay your contractors or secure your new property.
5. Finalise your remortgage: Complete your first-charge remortgage process. Because the property is now refurbished or your finances are stable, you could secure a better loan-to-value (LTV) rate.
6. Repay the facility: Use the equity released from your new remortgage to pay down the balance on your revolving credit facility. The interest charges stop immediately, and the full credit limit becomes available again for your next project.

Revolving Credit vs. Traditional Bridging Finance

When looking to bridge a financial gap, many landlords automatically think of bridging finance. While bridging loans are useful, they have distinct features that may not suit every scenario.

Bridging loans are typically categorised as either open or closed. An open bridging loan has no fixed repayment date, though it usually must be repaid within 12 to 18 months. A closed bridging loan has a clear, fixed exit date, such as a confirmed property sale or a finalized remortgage date.

Furthermore, most bridging loans roll up interest. This means you do not make monthly payments; instead, the interest accumulates and is paid in one large lump sum at the end of the term. While this helps with monthly cash flow, it can make the overall cost of borrowing quite high.

In contrast, a BTL revolving credit facility allows you to pay interest monthly only on what you borrow. There are no exit fees when you pay the balance back to zero, and you do not have to reapply for a new loan every time you need quick capital. It provides a reusable safety net that bridging loans simply cannot match.

Managing the Risks of Secured Borrowing

While a revolving credit facility offers excellent flexibility, it is a serious financial commitment. Because it is secured against your property as a second charge, you must manage it responsibly.

Your property may be at risk if repayments are not made. If you default on your payments, it could lead to legal action, repossession of your investment property, increased interest rates, and additional charges. Unlike bridging loans where interest rolls up, you will typically need to service the monthly interest payments on any drawn funds, so you must ensure your cash flow can support this.

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People also asked

Can I get an unsecured revolving credit facility for my BTL business?

No, the product discussed here is a secured facility. It is secured as a second charge against a residential buy-to-let property, which allows landlords to access larger limits and lower rates than unsecured options.

How quickly can I access money from a revolving credit facility?

Once the initial facility has been set up and secured against your property, individual drawdowns are highly efficient and are typically processed within 24 to 48 hours.

What is the difference between open and closed bridging finance?

A closed bridging loan has a confirmed, fixed exit date and plan, whereas an open bridging loan has no set exit date but is usually expected to be repaid within a year.

Do I pay interest on the whole credit limit of a revolving facility?

No, you only pay interest on the money you have actually drawn down. If your limit is £100,000 but you only draw £20,000 to bridge a remortgage gap, you only pay interest on that £20,000.

Can I use a revolving credit facility for auction property purchases?

Yes, this is a very common use. It allows you to act as a cash buyer at auction, secure the property quickly, and then arrange long-term buy-to-let mortgages later.

Taking the Next Step with Promise Money

If you are planning a remortgage and want to avoid the delays, high fees, and rigid structures of traditional bridging loans, a secured BTL revolving credit facility could be the ideal tool for your portfolio.

As an experienced broker, Promise Money can help you compare available products and find a solution tailored to your investment strategy. To learn more, visit our hub at promisemoney.co.uk/landlord-revolving-credit-100 or speak directly to one of our expert advisers by calling 01902 585020.