I own two properties outright – both have tenants and yield 9.5% of their £85K (each) value. I've owned them for four months they have been let for two months. I have no proof of income as I've just started doing this full time. Can I BTL remortgage these at a competitive rate anywhere, or do I need to wait six months and go through TMW?
The wider issue here is that you can buy properties for cash, with all the advantages that brings, but you don’t want to then wait six months plus before you can repeat the process. If the mortgage lenders that give you the best rates require that you own the properties for six months before you can apply for a mortgage, you are missing out on potentially lucrative deals because your cash is trapped in these properties.
You have a defined chunk of cash and it is big enough to buy properties outright, as you have bought two worth £85k each (I’m not sure if you paid £85k or if, now you have refurbed them, they are worth £85k – not that it matters either way).
You already know that being a cash buyer allows you to close deals fast, to negotiate harder, to buy unmortgageable properties and probably to make bigger profits. This will be of great use in the solution to your problem.
Using your own cash to buy is a wise move because you have zero borrowing costs. The only problem with that is when you find your next corker of a deal you cannot buy it because you have no free cash. The answer, or at least one answer, is to use bridging finance using either or both of you unencumbered £85k properties as security. Bridgers will lend 70% LTV, so that gives you £119k of usable equity to buy another property with.
You can leverage this money at any time from the point you became the owner of these two £85k properties. This will negate the need to go for poorer value mortgages which you will most likely have for the next few years and just wait out the six months then get your best mortgage deal.
This means you don’t miss out on the corker of a deal – plus you can use all the skills you have honed as a cash buyer to get a great deal on your new purchase. In this context, bridging allows you to apply exactly the behaviors you have already learned by being able to buy for cash. In other words, bridging mean you can operate as a cash buyer, without need to actually have the cash. I like that a lot.
In summary you will now own
Two properties bought for cash but now with a bridging loan secured against them (for the moment)
One new property bought for cash and owned outright; using the cash drawn down from the bridging loan
When the six months are up you can get a good rate BTL mortgage on your two original properties. This will repay the bridging loan and probably give you some extra cash in the bank.
Your third property is still owned outright and you are waiting for the six months to tick by so you can get a good rate BTL mortgage on it.
Should you find yet another corker of a deal during those six months, you can rinse and repeat the process by just repeating the bridging process on the third unencumbered property to allow you to buy the 4th for cash – and so on and so on.