TRUE STATEMENT: Many of our clients have created substantial property portfolios with very little money upfront. The secret is borrowing against the value of a property rather than the purchase price.
However if you re-mortgage a property, they will consider lending up to 85% of the market value. Therefore, if you can somehow turn your purchase into a re-mortgage, you can borrow 85% of the value.
To be able to re-mortgage, you must purchase the property first. We achieve this by arranging for our clients a very short-term bridging loan to buy the property and then the re-mortgage is often completed simultaneously.
In one recent example, the purchase price was £95000, the market value £140000. We were able to arrange a loan of £119000 (85% of the value) which not only covered the purchase price and costs but also left the client with a surplus of nearly £20000 to take on to their next property!
Many lenders have effectively boycotted this strategy by only allowing re-mortgages on properties that have been owned for 6 months or more, however we are still successfully completing deals with around 5 flexible lenders.
Posted on: 26th Feb 2008