THE QUESTION

I've sourced a 20% BMV deal and am wondering if it’s possible to get an interest only mortgage for the purchase taking into account 80% loan-to-value, so I can purchase with a smaller deposit?

THE ANSWER

You are on a loser if you want to get a mortgage lender to lend against value and ignore the purchase price - at the point of purchase they never do.  It is always the LOWER of purchase price or value.

However, some, but not all, bridgers will lend against the value and sometimes up to 75%, but it is often not quite as simple as that.

One key factor is whether the property is or has been marketed by an agent or not. Using the example of you think the true current value is £100k but you have negotiated to buy it for £80k. If it has not been marketed a bridgers valuer may (but there’s no guarantee) value it at £100k.

However, if it has been marketed and say the asking price was £85k, then valuers would override your idea its worth...

THE QUESTION

If I buy a property with five flats and then split the titles and try to get 5 BTLs mortgages for the flats: would there be an issue with mortgage providers not being willing to provide mortgages in the same building?

THE ANSWER

Simple answer - yes. This issue confuses a lot of investors.

1. You cannot be both freeholder and leaseholder, so the freeholder must be a separate entity to the leaseholder/s. Often this means using/creating a Ltd Co to own the freehold
2. BTL lenders have over exposure rules. This means they restrict lending in any given block to 20/25% of the total number of flats. In this case, five flats means you will need to find five different lenders
3. BTL lenders don’t like the same entity owning all the leases in a building.  So having all five leases in the name of the same leaseholder will cause problems.  You may not need five different people on each of these leases, but you will need a minimum of two each owning two or three leases....

THE QUESTION

I’m seriously considering converting my HMO into serviced accommodation (SA).  How easy would it be to refinance it as SA?

THE ANSWER

Buy-to-let (BTL) lenders invariably require a minimum letting term of six months and a maximum of 12 months in the terms and conditions.  That makes short-term lets a no-go area for the mainstream lenders.

Commercial lenders see serviced accommodation as in the same category as B&Bs and guest houses as it uses the same business model.  These lenders fall into two group:

1. Those that are OK with both SA and B&B and are happy to lend
2. Those that don’t like SA because the whole building isn’t used for the same purpose i.e. one flat in a block.

Due to the lack of a certain income lenders are nervous about the security of their loan and want some assurance that the income from the property will cover the mortgage payments comfortably.

If you remortgage an HMO lending is straightforward as you have the...

THE QUESTION

I’m flipping a house after three months,  I’ve heard most lenders won’t lend against a property unless I (the seller) have owned it for at least six months!, is this right?

THE ANSWER

That’s true to a point, but it depends on the lender.  A number of BTL lenders impose this restriction on the seller.

However, you shouldn’t really be selling to other investors as they view it as a logical rather than emotional purchase, often not wanting to pay full market value.

Main residence lenders are different, to a degree.  There are some that still impose the same restriction on sellers, but it is not across the board by any means.

So your buyers will not have access to all lenders (subject to their circumstances) until you have owned the property for 6 months.  The net result of that is they may be excluded from some market leading deals.

The key here from people who successfully sell within 6 months is - transparency.  You...

THE QUESTION

I am looking for some inspiration on a potential property.  It is a lovely property that is presently mixed use as a business and flats.

It can be converted to five flats that will fetch a premium price due to the location. The person selling is prepared to listen to options and is prepared to let us develop out the property while she still owns it, therefore, minimal cost to us at purchase.

 I have a few ideas myself but am looking for a bit of inspired creativity.

THE ANSWER

One creative solution was suggested by one of my students who recognised that this opportunity fits one of the strategies I teach on my Ninja Investor Programme workshops.

Through our brokerage, we have financed a number of projects funded exactly this way. So this is not just theory, it works and works well when the number are right.

If you have the current owner’s agreement and permission to enter the property and do the required works to do the conversion, then the delayed...

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...