virgin one account as bridging loan

chrisscott666

i have a virgin one account using it on my private house and have just started aquiring buy to lets. the virgin account had a very low valuers fee and start up costs however the buy to let morgages are much higher £250 valuation and £2000 arrangemnet fee.

im buying undervalued and destressed properties doing them up and renting them out and already have a few.

id like to buy the houses using the draw down facility on my one account so its cheap, do them up then re morgage (as virgin wont let you let them out) using a buy to let loan then rent them out, releasing my original equaty to use on a new house, meaning i dont have to put lots down in deposits.

can anyone see any problem with this? as far as i know theres no early repayment chage with virgin one as iv searched on google and in forums. where as my buy to lets have 2% early repayment which id have to pay everytime i remorgaged if i used them instead.

i earn 80,000 a year so im not over stretching my self and can cover the periods between purchase and letting out.

chris

chrisscott666

anyone any ideas about this?

happywarmgun

I've read it a few times and am still not clear exactly what you are asking! Have I got this right -

- You have a chunk of equity in your home, and a virgin one account.
- You are buying crumby houses/flats using your One Account Facility (effectivley buying them with your switch card!), and also doing them up with those funds.
- Once they have been done up to a state where they are no longer crumby and someone would be willing to remortgate them, you are doing so and releasing those re-mortgage funds back into your One Account?
- You then want to repeat the process.

If I have all that right - you are doing nothing wrong or illegal (as far as I can tell, and assuming you are being fully truthful on the BTL mortgage applications).

I have thought about doing this but decided to take a punt on other things. Fortune favours the brave and I wish you every success. The only fly in the ointment is that I wonder how many properties the BTL providers are going to let you have on your books as a 'hobby' landlord in the new world. 80k pa, even if secure income, aint much shakes if you're guaranteeing repayment on over half a million worth of property debt....

chrisscott666

You pretty much have it nailed down, I dint have long to write it as I was at work, except

I have a one account on my personal home, 25% equity but I’m not using this, as I’m nowhere near my maximum for what I earn, so I can borrow another 100k before I hit my earning limit, I have 25k in my account in savings being offset, so my plan is to buy houses around 60k using 15k of my own money and increasing the maximum loan on my one account (so ignore my own house as this will effectively be a new mortgage but linked to my current one with them, i.e. I now owe £45k I will then owe 90K) then do the new house up (may have to wait 6 months to rent it out due to rules) then remortgage with buy to let for current market price (lets say £80k) pay the 45k back to virgin clearing my second mortgage and releasing £15k cash to buy another property but still having 25% in the new house plus a bigger mortgage then rent it out.

I currently have one buy to let with Birmingham mindshare as well, i just dont want virgin to charge me a 2% fee for closing the second morgage early (i know its effectivly a bigger mortgage secured on 2 houses rather than a second mortgage) so i think its just like overpaying but was just looking for a second opinion on this.


Maybe this will make it a bit clearer.
Most of the houses I’m interested in are £60,000 or there about so ill use that. Most mortgages want 25% deposit so £15,000 and borrow £45,000. Then do them up and remortgage them for around £80000 after 6 months and rent them out getting 450 a month.
£80,000 – 25% = £20,000 (£15,000 original plus 5k extra) leaving £60,000 mortgage so i now own a house worth £80,000 with a 25% stake and paying off the old mortgage of £45,000 leaving £15,000 extra which I can use for the next one.
Now as I want to build up houses asap, I don’t want to be saving up £15,000 for each one as this takes 3 or 4 months, if I can use the same equity for each it will be a lot quicker, it helps by sniffing out houses that are below market value.

Traditional method using buy to let mortgage (I’m using my Birmingham midshire figures as a example)
£2,000 arrangement fee
£400 valuation
4.9% for the 6 months on £45k = £1102
2% early repayment fee on remortgaging within 2 years= @£1000
Arrangement fee on new mortgage £2000
New valuation fee£ 400
Total £6902

Using the extra drawdown on my virgin one account, increasing my limit from 45k to 90k
Arrangement fee £40
Valuation £165
3.9% for 6 months on £45k = 877 (im guessing the rate as my details are at home)
No early repayment when remortgaging and paying off virgin
Arrangement fee on new mortgage £2000
New valuation fee £400
Total £ 3482
I cant see any glaring holes in the idea which is why I’m putting it out there for a second opinion

Conrad

I cant wade through all this, it would be far easier had you made a few simple bullet points, but having skim read it, then yes in principle it is usualy the cheapest method to remo a main resi - but you say above you have 25% equity which is very little so you need to check Virgin will lend above 75%.

When you come to remo the buy to let properties be aware you normaly cant do it for 6 months and it is'nt straight forward, so there is no guarantee you will be able to remo

chrisscott666

i think there’s still some confusion here, I’m not remortgaging my personal house, i happen to have that mortgage with virgin one and im keeping it the same with no changes to it. on my wages i can borrow 280k but i only owe 45k on my own house, so I’m getting a second house through virgin, think of it as a separate mortgage, where I pay 15k deposit and borrow 45k. i now owe virgin 90k on 2 different houses 45 on each. its all because virgin wont let you rent a house out, apart from a short time with there permission and paying them £120 so i need a buy to let on it eventually and it also needs remortgaging for its true market value to release the 15k again to do the same again

munkypuzzel

I dont know why you would get a seperate mortgage with Virgin for the second property?

I have a virgin one account with around 170k facilty spare. I owe 100k on my own house. My facility with virginone is 270k.

Twice now, i have bought another property (basically on my switch card), and refurbed and sold on. I also remortgaged one on a BTL later on with another bank..

I never felt the need to tell Virgin what i was doing, as its my facilty to use how i want. In effect you can buy a second house 'cash' this way..

_bankrupted

Chris,

You certainly know how to explain something simple in the most complicated way possible. I would hazard a guess that no-one knows what you are taking about!!

The only reason I know what you are trying to say is because I have a one account mortgage.

The only risk here is that you are increasing your current debt secured on your current home, by borrowing up to your agreed facility ( or possiblly increasing your facility, I not sure from your explanation). You are then exposing yourself to the possibility that if all went tits-up, (houses don't rent, you lose your job, illness etc) then there is the possibility that you cannot repay your one account loan. As you know this will only hit you toward the end of the term as Virgin start to ask questions about how you are going to repay your balance that has not reduced over the last x years.

If you're financially savy the one account gives you lots of financial freedom. I don't really see a problem with what you are trying to do as either way if you owe debt and have assests those assests can be forced to be sold to pay your debt. But as stated above easier for the mortgage company to reposses something they have a charge over than a 3rd party forcing sale. And that is the only risk I can see if you are determined on a BLT empire.