The refurbishment mortgage boom is very different from previous booms in buy to let lending which had been all about new build flats, property clubs and huge discounts that turned out to be vapour. The current market offers a new and much more tangible opportunity for landlords – the huge value that can be created from picking up a property that requires work at a great price and turning a quick profit or settling in for long term gains by switching it to a buy to let.
Refurbishment Mortgages Explained
A refurbishment mortgage is quite simply finance obtained for the purpose of purchasing a property in need of renovation or repair.
Often a short term or specialist lender will be approached – for example Precise Mortgages – who will offer the finance on a property that does not currently look appealing for rent or occupation in its current condition (and therefore would not appeal to traditional buy to let lenders such as BM Solutions).
In all the years I have been advising on short-term lending I have never seen so many opportunities or so much demand from brokers for such products.
Roger Morris, Sales Director, Precise Mortgages – Talking to Mortgage Strategy Magazine
Long Term Plans From Short Term Gains
The opportunity to buy properties that less experienced landlords and potential residential buyers would shy away from – often repossessed properties stripped of amenities – gives experienced landlords a big edge. The great value these offer combined with experience turning these projects around fairly quickly can create some capital growth almost immediately.
Having bolstered the value of their property the landlord has the opportunity to either realise the gain immediately through resale of the unit or conversion of the short term finance into a term product and finding tenants.
Many lenders will have rules and restrictions making it more difficult for buy to let properties to be remortgaged or refinanced shortly after purchase however there are enough lenders available now for these cases that experienced landlords taking advice from a whole of market buy to let adviser will rarely come unstuck.
If the money spent on refurbishing the property has yielded a sufficient growth in value then this money can often be reclaimed by way of remortgage at this stage. This frees the capital up again for the next project or for cash flow purposes.
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