Estate properties are great investment opportunities with amazing ROI. If you desire to buy a property that you will eventually put up for sale or you need finance to acquire a property you will put up for sale, then getting a buy to sell mortgage may be an amazing option for you. This article explains what a buy to sell mortgage is, its comparison and also analyzes how to get one. Furthermore, it covers buy to sell mortgage calculator , its rates and deposits in the UK.
Buy To Sale Mortgage
This is a short loan financing that provides you with funds to buy a property. These properties are then resold for profit. Sometimes they are renovated if there is a need for renovation. Buy to sell mortgage is also referred to as a bridging loan. It differs from a mortgage for buying a live-in home property. One of the major differences between them is the duration of time it takes to complete the payment of a buy to sell the mortgage. Basically, other mortgages can take up to three years and above before payment is completed but a bridging loan demands a shorter time frame. Additionally, this mortgage mostly demands a higher loan amount than a standard mortgage.
How Does A Buy To Sell Mortgage work?
People who settle for bridging loans usually spend time looking out for new properties to buy. Mostly, you find them in auction houses and around probate properties. Also, they look out for properties that sell below market value BMV with little or no need for renovation. Ideally, you are expected to make at least a 20-25% deposit, unlike other mortgage properties. Moreover, buy to sell mortgages usually have an exit fee which you will have to agree on from the upfront. The exit fee is mostly paid out at the end of the loan agreement which is mostly after the property is sold.
Usually, the rates on buy to sell properties is higher than a standard mortgage because of the short term nature of the loan. It uses a monthly interest rate rather than the regular APR on other mortgages. This interest rate is on the ratio of the value of your loan compared to the value of the property.
There are also additional charges to consider such as an agreement to mortgage fee when you use a broker to apply for a mortgage.
Finance Options Available For Buy To Sell Properties
The various means of financing a buy to sell property include the following;
#1. Flexible Residential
Flexible residential is available on a main residential mortgage. Here, you acquire the property with the aim of moving into. Of course, this applies when you don’t already own a residential property You can get a loan with an LTV of up to 95%. If you currently own a home, you must have a minimum 10% deposit and be able to afford the new mortgage as well as any existing debt. The lender must also judge the property as livable. The greater the deposit, the better, because higher LTV packages frequently come with repayment penalties (which you’ll want to avoid if you want to sell the home early in the term). A 25 per cent deposit, on the other hand, will provide you access to deals with minimal or no payment penalties.
#2. Bridging Loan Short Term Finance
A buy to sell short term finance is open to you. Just in case you desire to flip a house between 12 months or less, a buy to sell short term finance is the perfect option for you. Ideally, the six months rule on mortgaged properties may not apply to this option of buy to sell mortgage because it intends to sell off the property fast. As a result of the short-term nature of this financial instrument, a bridging loan short term loan could be the best option for funding the purchase of buy to sell the properties. It has a high deposit fee which protects lenders in the case of default payment.
Mostly, it requires a minimum deposit of 25% as upfront payment and has a high-interest rate. Bridging loans do not have an early redemption penalty and are also faster than standard traditional mortgages. This means you can choose to make an early payment without additional charges.
#3. Refurbishment Finance
Refurbishment finance is specifically used for the development or renovation of properties. A house that is not habitable can be bought at BMV below market value most often. Investors and estate developers use it to acquire a mortgage loan and then refurbish the property and place it for sale again. The goal in this situation is to raise the value of such properties and then sell it off at a higher price.
Buy To Sell Mortgage Deposits
Basically, a buy to sell mortgage demands investors must have a larger cash reserve than most other forms of mortgages. Mostly, mortgage providers will not provide the entire sum forbuy to sell properties unless you present another property as additional security. The percentage of the money you provide out of the entire buy to sell property value is your mortgage deposits. Moreover, buy to sell mortgage has a 20 – 25% rule on deposits. This means you are expected to have about 20-25% of the property value to apply for a mortgage.
Basically, the larger your deposit is in comparison to your mortgage, the lower your loan-to-value ratio will be. Additionally, higher mortgage deposits on buy to sell property gives you lower interest rates and a better mortgage deal.
For instance Philips an investor wants to buy a property worth £400,000 with mortgage deposits of 40%. It means Philips will be paying £160,000 and get the remaining £240,000 on the mortgage. The interest on this mortgage loan will be lower compared to Austin that has 25% deposits for his buy to sell a property. Buy to sell mortgage providers insist on the 20-25% mortgage deposit to protect themselves in cases of default payment.
Buy To Sell Mortgage Calculator UK
The buy to sell mortgage calculator is specifically designed to provide guides on the cost of mortgage loans even in UK. It uses your ideal loan amount, estimated time and interest rate to calculate your monthly payment.
Most buy to sell mortgage calculator has some or all of the following interface
- Bridging loan amount
- Term required
- Monthly interest
- Additional Property used as security
- Property value
- Property mortgage balance
- Lenders facility fee
- Exit fee
- Brokers fee
- Admin fee
- Lenders fee
Fees To Consider In A BuyTo Sell Property Loan
- Arrangement fees
- Valuations charges
- Legal costs
- Exit charges
- Early repayment fees
- Interest rates
- Broker’s fee
- Lender’s fee
Buy To Sell Mortgage Comparison
This buy to sell mortgage comparison is a list of top bridging loan providers in the UK.
| NAME | LTV | LOAN TERM | LOAN AMOUNT | MONTH\LY INTEREST RATES |
| MFS Bridging Loan | 75% First70% Second | 3 Months to 2 years | £100,000 to -£30,000,000 | 0’59 – 0.95% |
| Precise Mortgage | 65% | 1 month – 18 months | £50,000 – £1,000,000 | 0’49 – 0.69% |
| LendInvest Mortgage | 75 % | 3 months – 1 year | £57,000 – £15,000,000 | 0.55% – 0.75% |
| Octopus Mortgage | 75% | 1 month – 23 months | £50,000 – £25,000,000 | 0.55% – 0.90% |
| United Trust Bank | 75% First70% Second | 3 months – 3 years | £125,000 – £25,000,000 | 0.48% – 1.10% |
Conclusion
As much as buy to sell properties appears appealing to investors, it is advisable to use the service of a mortgage expert. They are familiar with the pros, cons as well as extra charges that come with buy to sell mortgages. Also there are various buy to sell mortgage providers and this create room for comparison. Finally, ensure you effectively strategize on means of paying back the loan as failure to do so will place you at a huge disadvantage-loosing the property, fund and time invested in it.
