Arranging a Buy to let loan?

Simran

Hi..I recently saw a 2 bed ground floor flat in really bad shape, it needs a lot of work done to it, maybe costing £10 to £15,000 repairs, but the owner has offered to sell it to me for about £140,000 (market value of a good condition one in the area is about £175,000).

I'm planning to buy it, do it up and sell it, hopefully for a small profit but dont know what type of loan I would need...do I need to get a buy to let loan? in which case where can I find some good deals(I'm worried that if I sell the property after doing it up, i'll have to pay early redemption penalties)?

Also when applying for a loan, do I give the price i'm buying for or the normal condition (higher) value of the property? my problem is that many lenders only let you borrow about 65% of the "value" of the property so it would help if "value" meant the "good condition" value.

Will lenders agree to lend for a property in such poor condition?

Or should I just remortgage my existing main home mortgage (is that allowed if you need the loan to finance an investment?)

thanks a tonne for any help.

MortgageMamma

You should only really take a buy to let mortgage if you are actually going to let the property out, but some people take them for investment purposes like this. In order to answer your question fully I would need details such as, current amount of equity in residential property, salary and mortgage payments, plans for investment property, i.e. how long do you anticipate renovations would take etc. You would need someone to check your affordability to pay both mortgages in the short term and someone to source help you over the hurdles. In short, you need professional advice.

My advice to you is to look up or get a recommendation for a whole of market mortgage broker, who won't charge you a fee, to work out if your proposition is viable and then find the cheapest way for you to do it.

Good luck

Simran

Thanks, MortgageMamma, do you know where I could find such a broker, is there a website which could help me trace one in my area (Harrow)?

MortgageMamma

Geography is not my strong point I don't really know where harrow is, is it in middlesex? let me know and I'll see if I know anyone close by. Its not always necessary to see a broker face to face, you can get equally as good advice over the phone, its just more people feel comfortable meeting the broker in person. You could always post on here if there's any nearby brokers to PM you, I expect its OK for them to do that if you've asked them to.

Simran

thanks, MortgageMamma, Harrow is in Middlesex...would be grateful for any guidance on this.

MortgageMamma

I've just PM'd you.

infobank

I know this is going to sound a bit crazy, and would welcome any views on what I am about to say, bearing in mind that I think this can be done:

You can only get a mortgage on the lower of the buying price or valuation, so £140,000
But if it's in bad condition you can expect a retention (holding back of money until work is done, where upon the lenders valuer revisits the property to check and release the retention amount)

Now then ...... it could be possible to agree with the seller to allow you access to do the property up before completion.
So offer/accept £140,000
mortgage offer for say 95% of £140,000 with a "full or part redemption clause for works needed to be done"
Exchange contracts, with "completion date" set say 12 weeks in to the future (to give time to do work)
Seller allows you to go in and do the work (can be written up in the contract?)
Valuer revists and agrees work done satisfactorily, and authorises release of the retention
Mortgage offer now reprinted and issued with no retention for 95% of the purchase price.

If you use Intelligent Finance as the chosen lender, they have a clause in their offer contract (or did have) that states that you intend to redeem the mortgage on your exisiting property within 3 months of buyng this new property.
That way you do not have to sell to buy, and the existing mortgage is not taken in to account when working out how much they will lend you.

The mortgage could be set up on a no redemption penalty product (variable rate?) and you simply sell the new property, not the current property instead (as you have had a change of heart and dont like this new property after all ?!)

You would need to make a big enough profit on this project to pay the solicitors fees, valuers fees, repairs and improvements, estate agents fees on selling and finally the capital gains tax for "dealing in houses" (unless you made less than your allowed tax free limit.)
Which might then make you consider if it is really woth all the hassle.

johnm2565

Hi,

Go to https://www.home-remorgage.co.uk/enquiry.asp and fill in the form - a broker will then contact you to discuss this

Hope that helps.

John

MortgageMamma

john, this is against site rules so please !!!!!! off and stop doing it. your posts have been reported.