Whether you run a ‘quick sale’ company or have bought a property under market value at auction you will have very quickly discovered that Lenders will only secure funds against the purchase price or the open market value which ever is the LOWER. BMV (below market value) property purchases require a workaround to enable no deposit funds to be used and the maximum amount of equity released over and above the original purchase price.

This has not always been the case, but since the influx of builder gifted deposits associated with new build property it became easier to purchase an investment property without any deposit at all instead of the usual 25%. With inexperienced investors and even first time buyers being able to purchase without a deposit, Lenders became concerned that in the event of difficulty an Investor would be more likely to walk away from a property that held none of their hard earned deposit funds.

A valid stance perhaps, but it failed to distinguish between a shrewd professional investor and a first time buyer who otherwise may not have been able to get onto the property ladder.

More recently distinctions were made for properties passed between family members where an element of the property's equity would be gifted. Most Lenders now allow this type of transaction to take place without additional deposit funds providing enough equity is retained in the property for their security.

Open Market Value

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The secret to borrowing on the value of a property is to eradicate the purchase price in the form of a bridge and remortgage. A remortgage application made to a Lender does not of course entertain a purchase price and only deals with the open market value of the property and the standard lending limits available against it.

Unfortunately this process is not without hurdles to overcome.

Firstly the property has to be initially purchased with Bridging Finance and this can be costly. Secondly Mortgage Lenders became wise to this loophole within their criteria and most imposed a three or six month ownership period before they would accept a BMV remortgage application based on the open market value.

Bridging Loan Companies are more flexible with their criteria and it is not difficult to source one to lend on the market value of the property regardless of the underlying purchase price. Standard scheme prices vary vastly, but normally attract a 1.5% arrangement fee and monthly rolling charge of 1.5% (18% APR). The Company will charge around £750 for the legal fees incurred and finally when the funds can be repaid there may be an additional exit charge fee of one month’s interest.

Without getting into the nitty-gritty of the indicative costs it is clear to see that retaining a property on this basis for a six or even three month period until a Lender will accept an application will be extremely expensive and is therefore not financially viable.

With the borrowing power of our collective and commitment to encouraging Lenders to establish criteria to distinguish Professional Investors apart from others we are now able to offer tried and tested end-to-end scenarios using Niche Bridging Finance schemes and workarounds and a panel of selected Mortgage Lenders and products that allow immediate remortgages. The end-to-end costs are therefore kept to a minimum resulting in maximum profit from an under market value purchase. As near as you'll get to a 100% buy to let.

 

We offer many types of Bridging Finance:

 

• In a scenario where the property is in an immediately 'lettable' condition, over 100% of the purchase price can be borrowed providing this does not exceed 85% of the open market value. The Bridging Lender will condition that the offer of remortgage is in place prior to the closed Bridging Loan being released. We have many Closed Bridging Finance products depending on the circumstances.

 

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  In the same scenario where the Bridge is only required for 24 hours then rates start from 0.5% with no arrangement fees (legal fees may apply).

 

• If a property purchased under market value is to be kept for an unknown period of time perhaps to be sold on as soon as possible at a price closer to market value, then it may be more beneficial to use open Bridging Loan Finance rather than incur the costs associated with a remortgage. These Bridging Loans can run for up to 364 days and can be structed to suit the scenario.

 

• In certain circumstances it may be necessary to borrow funds for the purchase that exceed the actual purchase price up to a maximum of 85% of the open market value. The costs of this Bridging Product are negotiable on each individual scenario and available on request. 

 

• Within our collective we have Private Financers who are looking for an alternative investment. Without the commercial overheads these clients can often assist with purchase funds for a small proportion of that of the Bridging Companies. These private arrangements will be by individual request and often involve an undertaking drawn up and overseen by legal representatives.

  

The fees and APR's shown above are for example purposes. Whilst every effort is made to make sure they are up to date they are of course subject to change along with the terms and conditions. To receive an accurate illustration please contact us with your requirements.

 

 

Immediate Remortgage 

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Once the property is purchased using the cheap, fast Bridging finance an immediate remortgage is required to borrow against the open market value of the property. This remortgage can take place the same day so the equity can be released immediately or it may be more financially beneficial to take advantage of the maximum term of the Bridge without any further payments; letting the Bridge run for the first full month for example.

It has taken a long period of time to build up a substantial panel of Mortgage Lenders many with products exclusive to us that will allow this type of transaction and for our members this almost certainly provides a remortgage outlet for almost all scenarios.

Many of these Lenders will impose idiosyncratic rules before releasing funds and not all of them will consider transactions that involve ‘distressed sales’ for example. It is important that every detail of the under market value transaction is fully disclosed in order that the remortgage is placed with the most suitable Lender.

Benefits of our Lender panel:

No rental calculations
Self Certified Income supported borrowing levels
100% rental calculations
85% loan to value borrowing

No Minimum Income Requirements

Products with no redemption penalties at any time
Houses in Multiple Occupation (HMOs)
Student Lets

Rent-backs
Distressed Sales
Commercial & Semi Commercial BMVs

 

Please contact us with your enquiry.

 

 

 

Property Refubishment

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If the main reason the property has been purchased below market value is due to the refurbishment works that are necessary in order that the property be let or even habitable then there are alternative and more cost effective options to buying using a Bridging Loan. For Professional Investors we have a number of Mortgage products that will allow Lending to take place in two stages. The first stage is on initial purchase lend based on the purchase price. The second stage is for the property to be re-inspected by the Valuer once the works have been completed and funds can then be released against the open market value over and above the original purchase price if required. Dependant on the scale of the refurbishment works involved there are also other options for a release of funds if the Valuer can confirm that a sixty day period would be sufficient to renovate the property to a suitable condition for letting. Please contact us to discuss your current or future refurbishment purchases. 

 

 

 The FSA do not regulate some forms of mortgages.