Buying a property to renovate & sell on

TommyTucker_2

Hi guys & gals

I am intending to start renovating a property as a sideline, and just wanted to query something.

In the books I've read so far, the various types of mortgage are discussed (repayment, interest-only, etc.), but what I don't understand is this:-

If I'm going to be buying a property to renovate & sell (as opposed to let out), surely no bank would want to give me a mortgage if I'm planning on paying it back within, say, 3 months?

Apologies for what is undoubtedly a stoopid question, but it's just bugging me. I am researching all the time, but this particular question keeps raising its head. Is my only option to go with a specialist mortgage broker, or can I still get a deal with a 'normal' high street bank?

Many thanks for any responses.

dimbo61

You need to own a property for 6 months before you can remortgage.
You need a broker to help You find a lender willing to help you with the finance.

carlx

Are you utilising a standard residential mortgage as it is the only property you own?

If i am correct in that assumption, then if i were you then i would get the standard mortgage, take 6+ months to do the renovation, sell the property and pay no capital gains or income tax as you receive primary residence relief.

Obviously if you want to turnover property faster, then you will need to get a broker for mortgages, you will need to pay tax on the profits and generally you will be paying out more money.

It's a choice you need to make, do one or two properties every year and pay very little tax, or do it properly.

Contemptuous

There are also ERCs to consider. High street lenders aren't geared towards short term mortgages so you'd likely have hefty penalties for taking a mortgage for less than, say, two years.

One for a broker I think!

Let_Us_See

ABC of property development? You are obviously reading the wrong books or the authors haven't taken the time to research development funding.

Often very much a cash-based industry, although there are numerous Development Finance lenders who you won't find on the High Street. Most competent brokers will be able to assist.............which is how we make our income!:)

betmunch

From a brokers point of view.

While you can do this, quite easily in fact, I dont think I would help with this.

while lenders do ERC free products, they do not want to have them paid back in a few months over and over again.

For a broker to put in multiple applications from the same person that always takes advantage of the lack of ERC would, in my opinion, raise questions about the quality of the business and could lead to being struck off a lenders panel.

I may be being over cautious, but I would rather turn away the business to protect my long term goals.

Any other brokers feel the same? I'm curious to know if I am being overly cautious.

What you have described requires bridging finance, which of course requires a higher interest rate

Let_Us_See

I am surprised you would even consider standard residential funding in such a situation. Sure, it might work once on a no ERC scheme, but not longer term. Development Finance is a specific product for.........

betmunch

Thats what I'm saying. I wouldnt do the business.

I take it you wouldnt either then?

Let_Us_See

Agree 100% ..............not standard residential. But I would certainly go down the development finance route.

amnblog

Tommy

Buying a home, doing it up, and selling it in a couple of years is common in the market and done on residential mortgages.

Developing property 'as a sideline' is a business activity.

Residential mortgages are not appropriate for this.

The idea that your can develop property by raising mortgages on competitive residential rates with modest deposits is a myth.

I blame Channel 4.

TommyTucker_2

Thanks people for all of your replies.

Just to clarify, I am already a homeowner witha small (£50k)mortgage and I have about £35,000 in savings.

I take on board all of your comments, thank you.

I am tempted to sell my home and renovate houses while living in them, to avoid CGT.