Development loan - bridging loan - equity release mortage? Any other options?

Feebs77

Hi,
I'm buying a flat to live in for £430k. It's a cash purchase. I have about £20k left over in cash.

I want to buy a second flat for £420k,  to refurbish and sell.

I'm self employed but my company is only 2 years old and has really low profits, so I don't have an income yet.

Does anyone know any good brokers for equity release mortgages or bridging / development loans who could tell me how to buy this second flat? 

I spoke to a mortgage broker who said:
1) Let to buy not possible.
2) Buy to let not possible.

So now I'm considering:
3) equity release mortgage:
However got no income.
4) A bridging loan:
But loan companies only lend 75% ltv, with interest rates are almost 1%. 
Don't have the 25% of £420k. (Similar with buy to let).
Property is not in letable condition anyway.

5) Borrow through my company as a development project.

Any advice much appreciated.

foxy-stoat

I do not think you have many options with a 5% deposit and no money left to spend on the refurb, and no income.  Best put the idea of buying the second flat to flip on the back burner until you have more cash and some income.

bris

Never going to work, no lender is lending you 400k when you have nothing left to refurb it. Nor would they want the security of your own home as it's almost the same value as the loan so they can't win anyway you look at it here.

[Deleted User]

Feebs77 said:

Hi,
I'm buying a flat to live in for £430k. It's a cash purchase. I have about £20k left over in cash.

I want to buy a second flat for £420k,  to refurbish and sell.

I'm self employed but my company is only 2 years old and has really low profits, so I don't have an income yet.

Does anyone know any good brokers for equity release mortgages or bridging / development loans who could tell me how to buy this second flat? 

I spoke to a mortgage broker who said:
1) Let to buy not possible.
2) Buy to let not possible.

So now I'm considering:
3) equity release mortgage:
However got no income.
4) A bridging loan:
But loan companies only lend 75% ltv, with interest rates are almost 1%. 
Don't have the 25% of £420k. (Similar with buy to let).
Property is not in letable condition anyway.

5) Borrow through my company as a development project.

Any advice much appreciated.

The broker is right because you don't intend to let the property.  There is such as thing as development finance available but with a 5% deposit I don't think you have a snowball's chance in hell of getting it.  Equity release products are aimed at those 55+ so are you 55 or older?

Do you even have a 5% deposit, what about the £12,600 SDLT you will have to pay?

Feebs77

Hi,
Thanks for all your views.
I'm 43. I have £20k (5% deposit). 
I have about £35k cash coming in salary in 4 months to do all the refurbishments.
I planned to do the work and sell within 1 - 1 1/2 years. 

Development finance and bridging loans seem to be the only options, but I think I'm still short of cash.
Anyone know if I have any chance of buying this?
Or recommend a broker who can advise me on what type of money I need to do this type of project?
  

foxy-stoat

Bridging loans aren't the best product for that amount of timescale as the interest rates are high.  Try speaking to a local broker for options, they may not be any but no harm in asking. 

One thing to note though, you want to borrow £400,000 over say 25 years right, even at 3% (which you probably wont be able to get) the monthly repayments are going to be £1900 - at 4% the monthly payments are £2,100 - how are you going to pass the affordability with no income?

Are you going to be grossing £8,750 a month or will you be paying yourself £35,000 in 4 months time?  you may struggle as your numbers may not work for any lender.

DCFC79

I dont see it working myself, a bridging loan will only work if your sure you could sell the property really quick as the fees are high, how sure are you it would sell really quick.

[Deleted User]

Feebs77 said:

Hi,
Thanks for all your views.
I'm 43. I have £20k (5% deposit). 
I have about £35k cash coming in salary in 4 months to do all the refurbishments.
I planned to do the work and sell within 1 - 1 1/2 years. 

Development finance and bridging loans seem to be the only options, but I think I'm still short of cash.
Anyone know if I have any chance of buying this?
Or recommend a broker who can advise me on what type of money I need to do this type of project?
  

Do you have another £12,600 to pay the SDLT on top of your £20,000 deposit?

If you want mortgage "advice" then post on the Mortgage & Endowments board.  I say "advice" because legally the brokers on there can't give you specific advice but they could give an indication as to whether your plan is feasible.  Buyers of residential properties, as in buying their own home, aren't getting 95% mortgages at the moment and some are struggling to even get a 90% mortgage, those are lower risk borrowers than you so I'm not sure what you are proposing is feasible at this time.