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I wonder if someone could help with this.
I am looking at purchasing a house . The house is in good condition, apart from needing a new bathroom as the current one is very old (although still works). There are 7 houses on the street which are almost identical and were in good condition when sold. They all sold for £99,000 (give or take £2,000)
So my question is quite simple. If I get the house for a bargain price of lets say £80,000 and pay using bridging finance. Is there any chance at all of me remortgaging on a buy to let mortgage after a month or two (the new bathroom the only change to the house) at around £99,000?
Any help would be greatly appreciated.
Hi David and welcome to the tribe.It is highly unlikely that you would get an up-valuation after such a short time. Lenders like to see "seasoning of title" due to money laundering protocols.When coming to remortgage, even after putting a new bathroom in, you would likely only get a BTL mortgage for £75% of £80K, which would be £60K, meaning you would have to leave £20K in the deal, although, on paper you would have equity of circa £40K.
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
How long could Baker potentially have to wait for 'seasoning of title'? I'm looking at adopting a similar strategy so that I can keep going, but am a little concerned that I could be stuck in limbo while waiting for revaluations.
It is typically 6 months in terms of redeeming cash purchases, but there are some lenders who are more flexible.However, to release equity from a property that you had done very little to would mean a substantial time passing to allow for capital appreciation for equity to accumulate. No lender would accept that major equity had accrued in a 6 month time frame, even if the property had been purchased significantly below market value. The lender will almost certainly take the view that the the BMV purchase price is the actual market value.Just in case I confused the issue, it is possible to buy for cash and then take out a BTL mortgage within a short time frame afterwards. However, the lender would value the property at what you paid for it or the market value, whichever is the lower, so you would only be able to recycle 75% of the purchase price, therefore leaving cash in the deal.For a lender to up-value a property with very little work having been done, then, probably in this market, you are waiting years in order to be able to extract further equity.
Thanks very much Vanessa for your reply! This helps clarify the subject a lot.
Indeed, thanks a lot Vanessa, you certainly know your stuff!
Your strategy is good.
From my experience you can get a bridge at 75% LTV of the purchase price for a minimum term of 1-24 months
I would watch out for the exit fees and any other charges which could eat into your profit.
Generally a bridge would cost you
2% arrangement fee , 1% monthly and potentially a 1% exit fees. And you will have to pay valuation feesfees the lenders legal fees as well as yours.
You could achieve 75% of the purchase price say £80k. Spend a few thousand on it and then find another long term lender who will provide you 75% against the OMV (the uplifted value). Most lenders will say you have to wait 6 months or they'd be happy to provide you finance but will only give you 75% against what you paid for it, i.e. £80k. At least this way you can they exit from the bridge.
But there is a lender who will within 6 months revalue your property at the uplifted OMV say £99k and give you 75% against it. You just have to show them proof of works. What work have you done and potentially proof of receipts for the works. This way they know you have added value. This lender I met last week. I'm not sure if I'm allowed to mention names. Their rates are good too.
I hope this helps
Vanessa, is he allowed to mention the lenders name? I'd be interested in knowing who it is.
Yes, it is not a problem to mention the lender's name.I am aware that Kent Reliance and Virgin are two lenders who consider this, but there may be others, and lenders sometimes release limited edition products, which we would always notify via Property Tribes if they do.
I think it’s not a fantastic deal
if you add all your costs with this it’s going to eat into your profits big time
then you have the risk of a value down valuing and giveing you less than you want
cost today are high
if it was me I would keep it and rent it for yeild in todays market
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
I did this previously a couple of years ago, but haven't bothered since. I bought for cash refurb and remortage but lenders are reluctant to value above the purchase plus evidenced actual works costs. I did get a bit extra out but I bought for 68k spent approx 12k (evidenced) and they valued at 90k 3 months after original purchase, even though other properties sold for 105-110k in the same street.
In hindsight it would have been simpler to purchase with mortgage and refinance 2 years later having taken extra cash flow in that period based on the lower mortgage.
There are additional costs involved with bridging etc. And often limited availability of lenders who want to lend within 6 months so you have to factor in how long you bridge etc.
Have you considered mortgage and loaning money for refurb and offsetting the Loan interest etc. That way you don't have to put as much of your own money in so possibly allow you to buy two?
Someone may correct me but I think you can offset loan interest for works on the property, I have in the past for a new roof on an established rental though
Slowly working towards financial freedom