THE QUESTION

If I buy a property for cash through a Limited Company, does the 6 month rule regarding remortgaging apply?

THE ANSWER

Some lenders choose to apply a 6 month restriction, whilst others don’t.  Actually, it isn’t really a rule, just a restriction, but it has commonly become known as ‘the six month rule’.

For those lenders that apply it, the point to get clarity on is that it is a length of ownership restriction, not a method of purchase restriction.  This means that, if a lender requires you to own the property for 6 months, the restriction will apply regardless of the entity whether you bought it as an individual or a company and regardless of the method you used to buy it, cash, bridging or any other method.

If you want to buy cash and refinance within six months, simply pick a lender that does not invoke the restriction.  Any decent broker will be able to source those lenders for you.

It is also worth highlighting the other issue...

THE QUESTION

Is bridging finance calculated on a deal-to-deal basis, rather than an individual’s mortgageability?  What would I have to demonstrate to be successful in getting a bridging loan?

THE ANSWER

Bridging has a completely different underwriting process to mortgages.  Mortgages are income-based lending for the medium to long term; whilst bridging is asset based lending for the short term.

The actual terms are determined on a deal-to-deal basis, as is the bridgers decision to lend or not to lend on a specific property, regardless of the fact that they are happy to lend to you as a person.

Invariably, bridgers will deduct the monthly interest at the drawdown of the loan (Retained Interest), so making monthly payments is rarely a consideration.

If you can demonstrate more than one exit route that will play well with bridgers.

Getting the term right is important as you want to be in a position to repay your bridging loan early, or at least on time. I assist all my...

have made an offer on a BMV property? (fingers crossed). I was hoping for a family member to buy for cash, renovate the property and then me and my business partner could buy it with a mortgage getting our cash back out. 

Our objective is to recycle as much of our cash as possible as quickly as possible.   We are hoping to purchase the property for 85K, spend 10K on refurb and have it revalued at 120K-130K. So our thoughts were if we bought it as a cash purchase in someone else’s name, then remortgage it in our names (personal not LTD) we wouldn’t have to wait 6 months to get our cash out. Does this sound do-able?

So your plan is to use your own cash but pass it to a family member to buy then get it back when they sold it to you, got it.

Two problems in making that strategy work

• 1. it is not what is known as an arm’s length transaction i.e. seller and buyer are known to each other and lenders don’t like that
  2. the lenders that won’t allow you to...