Some investors who have a healthy bank account wonder if it’s best to use the cash on a property investment or to keep it for a ‘rainy day’ and apply for a mortgage for their next property purchase. It’s a dilemma; buying cash
There are definitely advantages to buying cash:
IF you want to get your cash out for another deal, then improve the value and then mortgage the property at the new value. Make sure the refurb work adds exponential value, not just the cost of the work done. Otherwise you gain no advantage.
It’s wise to have owned your new property for at least 6 months before you apply for a mortgage as will give you the widest choice of lenders and access to the best deals. Finance at the done-up value to minimise the cash you leave in the property. This give you the best chance of repeating the process and following the same model time and time again.
A good broker will find the lenders most likely to lend at market value, rather than the actual purchase price, which will also ensure you have cash to invest in the refurb..
You don’t need to miss out on any other great deals that come along while you are waiting to mortgage your property. While your cash is tied up in the property it doesn’t mean you can’t purchase any other deals that come along.
Bridging finance will allow you to borrow 100% of the purchase price of a similarly priced property, plus the refurb costs too. How? by using a Cross Collateral bridging loan secured on both the property you already own and the property you want to buy.
If you’re thinking about whether to buy cash or apply for a mortgage you might find this video will explain how this works in more detail.