Developer Mortgage

cheesepants

Hi all,

I'm going to be buying my first property to develop soon. I'll be paying £90k for the house and can put down a 25% deposit.

The development should take 2 months and then I'd like to put the house back on the market.

Please could someone advise upon the best type of mortgage for this situation? i.e. one with no fees? interest only? etc... I've been on moneysupermarket but I'm still no wiser???

Many thanks.

Fire_Fox

Welcome! Best thing to do would be to make an appointment with an independent mortgage broker.

cheesepants

Hi Fire Fox,

Many thanks for your fast response. Yes, I'm going to see if I can get an appointment with a 'whole of market' broker today, however if there are any developers who could give tips on the type of mortgage they use, that would be brilliant?

I'll post any useful information the broker tells me on here.

Many thanks.

Jimbo1976

If you are borrowing for only 2 months then you are probably looking at a bridging loan, these are much shorter term that traditional mortgages but tend to cost more.

The interest cost will be 1.25-1.5% per month with a set up and an exit fee. As Fire Fox says go and have a chat with a broker. However make sure they understand bridging.

dimbo61

Now are you after a BTL mortgage ( but you want to sell rather than rent!) or a Loan
The problem with your idea is that the days of buying a property cheap spending a few £KKK on doing it up and selling for a huge or even small profit are gone!
You pay out fees and costs on buying the place for say £100K you then put in new bathroom, kitchen, rewire, nice wood flooring and put it on the market for £125K so a nice couple come along and want to buy BUT the surveyor values the place at £105K because he will look at recent sold prices !!!!
I watch Homes under the hammer and love the way they skip over the buying and selling costs and some of the valuations are very 2007/2008 before the housing market crashed.
The COOP might do a loan to buy a property and refurb IF you have a good business plan

martinsurrey

if you flip the house that quickly it will be very hard for your buyers to get a mortgage.

Most lenders will only consider a mortgage on a property 6 months after it was last sold.

factor that into your budget.

googler

martinsurrey wrote: »

if you flip the house that quickly it will be very hard for your buyers to get a mortgage.

Most lenders will only consider a mortgage on a property 6 months after it was last sold.

factor that into your budget.

Exactly what I was going to say.... unless you can find a true cash buyer after 2 months, it will be VERY difficult to sell......

cheesepants

Thanks for the advice dimbo61's. I'm quite a risk adverse person and hopefully have done enough research. I've been watching the area for some time and know other developers in the area who have given me the costings and templates of similar houses they've completed, so there should a a margin on this one. It's my first project so even if I simply break even I'm looking at it as an education!

Regarding Bridging loans, I have little idea what these are but shall look into them. I've got a mortgage appointment on Thursday so will see what they say.

I'm concerned about these comments regarding buyers only being able to get mortgages 6 months after it was sold - is there a reason for this?

To be honest I'm being very optimistic that I'll be selling-on within 6 months (I'll base my future calculations on 6 months from now on to be safe), but in theory the renovation should only take 3 months max and houses have been selling pretty quickly in this area lately.

What do other developers do - are you all cash buyers?

Yorkie1

The 6 months thing is, I believe, related to money laundering regs. I don't know if there is an exception if the seller is a developer. If you get no joy on this specific point on this board, you may wish to post the particular question on the Mortgages board (mentioning you've been redirected there from here).

bigchrissyg

We enquired about something similar a few years back.

One of the solutions is to get an 'offset' mortgage. These offer no real competitive interest rate, but they allow you to offset your interest on the mortgage against a tied savings account.

If your 'doing up' a house, you can leave all your funds in the offset account. And pick away from this stash as you need it. In the meanwhile, you get the benefit of no interest payable on the amount in your linked savings account.

Also, no minimum repayment either. Check them out.

cheesepants

Cheers, I'll look into both. I wasn't expecting the 6 month thing!

Do you think most developers are generally cash buyers?