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  • Buy-to-Let

    Remortgage now or wait?

    I have just bought my first 2 BTL properties outright at auction which both have long term sitting tenants.

    I am keen to refinance and use the funds to buy a third BTL property.

    My broker has found a lender who will give me a mortgage before i have owned the property for 6 months.

    The issue is that they will lend on the sale price not the value. I belive the properties to be worth slightly more than i paid.

    One was 53k...i think it is worth closer to 58k

    The other 63k it thing it is worth over 70k

    I know that lenders are being pretty cautious at the moment with valuing properties

    I currently have a free free 5 year fix mortgages on offer at 3.84%

    My question is is it worth waiting 6-8 month and remortgaging in the value ir should i go ahead now?

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    Hi Kimar,

    Lenders and their valuers will value the properties at their purchase price or market value, whichever is the lower.

    Therefore, they will only value them at what you paid for them at auction.

    If you wait six months, they will value them at the same as today, unless you have added value by development/refurbishment and are able to show that you have done this.

    Therefore, you should either add value and then look to get a higher valuation or, if they do not need refurbishment, you could go ahead and take out the mortgages today.

    If you waited six months to finance them, you may have a wider selection of mortgages and better rates - that is the only reason to wait imho, if you are not undertaking improvements that will add value.

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    If you bought them today at A price, is that not THE market price. (Unless you had competitive advantage in purchasing or added value?)

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    Speak to a Broker and they will give your options - we always try to wait for the 6 months as we always try to add value by refurb or more (extension etc) and also you get much better rates and higher LTV as a whole - last time I enquired the only options if we remortgaged under 6 months (as a LTD company) would only offer 60% LTV - we waited until 6 months and got 80% LTV which vastly increase ROI as we left half the amount of cash in the deal and that increases capital funds for an additional purchase or two.

    If you are buying at Auction again, you can get mortgages that are offered in principle and can complete within the 28 days of the Auction to comply with their requirements so maybe worth also enquiring about that - normally better rates and more options here than trying to remortgage after 4-8 weeks as the options are fewer.

    As long as the Broker knows your exact plans they will be able to give you all the options you need.

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    Currently lots of cheap mortgages around. In 6/8 months the situation could well change with not only higher rates but tighter lending requirements. We are looking at Brexit, European debt crisis round the corner, property prices correction  all over the next 6 months or so. Murphy's Law  kicks in and you could well end up worst off.  If you need a mortgage then why take the risk do it now pp with such good deals around. Remember its not what base rate is but mortgages are priced off treasury yields and where wholesale money is available. If a down turn then the financial institutions will not be willing to lend to each other and the price of money goes up. ex 2007. Remember world interest rates are going up and the UK will be no different. The danger you face now is mortgaging at current values with property prices going down, and unless you have decent size equity in the properties negative equity could kick in very quickly. Thats why buying property now is a bigger risk than at any time since 2007/8.

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