I am aiming to buy a freehold BTL property that has three separate flats. I am unable to find a mortgage provider who will give a mortgage on this type of property. I was advised that I must have three separate leases in order to get a mortgage.
How can I get a mortgage on this property?
It’s no surprise that you are having trouble finding a lender for this; BTL lenders have a very 'vanilla' approach to what they want to lend on. This is based on their view of the worst case scenario i.e. how easily could they dispose of it if they had to repossess it? They look for properties with broad market appeal. Mostly, if it is not a regular freehold house let on a single AST, they start to put up the barriers.
These ‘unmarketable’ properties include:
The lender I’m with has revised their lending criteria to exclude the mortgage I have had with them and I’ve reached the end of term and need to remortgage.
The property is a studio flat with 63 years lease remaining, value £65k with 40k outstanding, but it is less than 30sq m.
What do you recommend?
You have two problems..
The majority of lenders set 30sq m as their minimum space threshold based on their belief that the marketability diminishes significantly below that figure i.e. it is so small it turns off potential buyers. However, there is not much you can do to increase its size.
Lenders get very jittery about short leases (anything less than 75 years), also due to the reduced marketability. In a stagnant market, the flat will decline in value as each year ticks down until the lease expires. Typically they can require anything from 25 to 45 years...
I am pretty new to this, I have found a few BMV properties, one is a 3-bed semi property that will sell for maybe £65k, needs a full refurb, market value on the street is approximately £145k. I don’t have much in the way of funds to put into this, what would the best option be?
The generic answer to your question would be delayed completion bridging, as long as the house was vacant. This enables you to borrow against the £145k post refurb value, not the £65k purchase price to complete the purchase,
Here's how it works:
Do you know any lenders who are willing to lend straight away? I’ve been trying to purchase a second property and they all say I have to wait six months before I can take out a BTL mortgage.
If you have bought a property for cash and are now seeking a mortgage to recycle your cash into your next deal, almost every BTL lender will impose a 6 month ownership restriction before they will accept an application for a remortgage.
You may wonder why; it’s because they have an objective which is diametrically opposed to yours. You want to get your cash out, they want you to keep it in, as they see you taking your cash out as a threat to the security of their money sitting in your property.
If you want access to the full range of BTL mortgages and the low rates that they offer, you have to wait 6 months and there is no other way to achieve access to them.
A very limited number of BTL lenders will accept remortgage applications within the first 6...
How can I purchase a property, refurb and refinance to extract most of my money WITHIN 6 months please? I can buy cash if that helps to start with.
Almost every BTL lender uses a 6 month ownership restriction specifically designed to stop you from doing what you want to do, as they view it as increasing their security risk. They feel safe when they have your cash, or at least 25% of it, invested in the property.
There are a very limited number of BTL lenders that allow you to apply within 6 months of purchase, but their lending is based on the purchase price.
One or two may allow extra borrowing on the money you can prove you spent on the refurb, rarely on the new market value you have created. So, if you are lucky, you might get a mortgage of 75% of purchase price plus 75% of refurb costs. Hardly getting most of your money out.
If you can buy cash you should do, as you will have zero borrowing costs, until you refinance. The other advantage of buying...
HMOs are a typical point where a clash of opinions occurs.
HMOs get valued as commercial properties, but HMOs converted from what was an ordinary residential property, rather than a commercial to residential conversion such as a pub or offices are NOT a commercial property, but a residential property temporarily being used for a commercial purpose.
These are the main differences between actual commercial properties and residential properties converted to HMO.
| || |
| || |
| || |
| || |
I'm currently looking at purchasing a house for £70k and I have funds to purchase outright with no mortgage. I have a potential tenant ready to rent at £550 pcm returning approximately 9%
My credit rating means I can't place a deposit and get a buy-to-let mortgage, hence buying outright. I’d like to take £60k out of the £70k paid back out for future investments.
Would the banks look at me completely different having a £70k asset or will they still view me as a poor risk and refuse to lend?
If I understand you correctly, you have previously been declined for a BTL mortgage because of your poor credit history. If that is correct, owing an unencumbered property will make absolutely no difference to that. Your credit history doesn’t change because you buy a property for cash.
Mortgage lenders turn down people with poor credit histories because that history identifies them as someone who has proved less able to maintain...
I’m looking to refinance a property as soon as possible to release cash tied up.
Similar properties on the same street sell for £95k and I purchased mine at £75k and spent about £5-6k on the refurbishment (painting throughout, new carpets, new kitchen units, new electrical wiring, new toilet and basin).
However, I’ve just heard no one took the requested before photos so I’ve got no photographic proof of what it looked like pre-refurb (and I can’t show off the refurb either!)
Will this present a problem if I try to re-value the property to a higher amount?
It helps to understand the mindset of the surveyor who will be visiting your property and that will be very much to value any recently bought property at the purchase price paid, unless given compelling reasons not to.
I'm looking at a HMO for my next project but would like to put this one into a new limited company. How easy\difficult is to get a mortgage on a limited company without any trading history
What are the perils and pitfalls of using brand new limited companies for lending? Is it possible?
Mainstream BTL lenders do not lend to limited companies or SPVs regardless of how young or old they are. If you want a 'vanilla' BTL mortgage you have to apply as an individual.
If you want to borrow in the name of a limited company, then you will need to go to commercial lenders, or what I would refer to as specialist lenders; those on the periphery of BTL lending.
Trading history, accounts etc. are less relevant if the property you are putting up as security has a provable, consistent income that reassures the lender that you have the ability to service the mortgage payments. So, if you can show a fully let property, with ASTs as the proof of...
In various interviews and strategies there is a fairly heavy reliance on buying BMV and recycling your cash quickly to multiply your portfolio and increase cash flow. This doesn't only seem to be theory, but what lots of investors are actually doing.
How is this achieved? Are people buying with cash and then able to get a BTL mortgage as soon as they like?
I guess another option is that some are using bridging until they've done the work and then getting the mortgage at the new higher value?
What are the options for those who simply want to use standard BTL mortgages? Would there be many with no ERC? If you use these to remortgage after 6 months after adding value, will the banks start to get annoyed? If that's the case is really the only option to wait out the 2 years and remortgage then? It seems like that will slow things down quite dramatically.
Building a portfolio traditionally can be a very slow process. Buy a property, put 25% deposit down, wait...