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Buying your first property

bridging finance Nov 20, 2018

THE QUESTION

I’m looking to buy my first house and I have £40K in cash ready to go.  Do I:

  1. Buy it outright. Do the full refurbishment (I’m looking at 12 weeks).  It will be worth £80k once complete and rent for £500pcm. so get a mortgage at £75K  LTV, once it’s ready to let.
  2. Apply for a mortgage at £75 LTV and wait at least six months to get my equity out.

Or is there a better way?

THE ANSWER

The argument for buying with cash

  1. You can buy much faster than getting bogged down in a mortgage application process
  2. If you can buy faster, you should be able to negotiate to buy cheaper - to a degree
  3. During the refurb period you have no monthly payments to make and incur no interest
  4. Once refurbed, value uplifted and tenanted you can apply for a mortgage. Wait six months if you want access to preferential interest rates; don’t wait if you don’t

At any point in between if you manage to find your next deal and certainly once you have refurbed and added value, you can bridge against the uplifted value of your property to borrow 100% + refurb of your next (similarly valued) property by using bridging finance.  Repaying the bridging loan when your mortgage comes through

 

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