Property investment isn’t always about buy-to-let and long term income, there are also plenty of investors looking to make money by buying, renovating and reselling properties quickly. But how do you finance this kind of property development?
In this article we’ll look at how buy to sell mortgages work, how a broker can help get the best deals and why you may not be able to use a traditional mortgage.
If you’d like to talk to someone about getting help with buy-to-sell mortgages please call 01743 382002 or read on to learn everything you need to know.
Everyone’s circumstances are different, our buy to sell mortgage experts have built long term relationships with specialist lenders who offer bridging loans and residential mortgages for property investors.
Because we know first-hand how scary it is to enter the mortgage market, we work hard to give you the best rates and highest chance of approval.
If you’re not sure what to do next, contact us or call 01743 382002 and we’ll match you with a specialist who’ll give you the right advice for you and your circumstance.
LG Embrey Financial Planning are independent financial advisers based in Shrewsbury, Shropshire under pi financial ltd, authorised and regulated by the Financial Conduct Authority.
Each situation is different that’s why our mortgage brokers are experts in all aspects of mortgages for property investors including residential mortgages, bridging loans and short-term finance. To speak with us please call 01743 382002 or fill in the contact form below.
What is a buy-to-sell mortgage?
A buy to sell mortgage is a short term home loan specifically for anyone wanting to buy, do up and sell a property for profit, sometimes known as ‘flipping’. A buy to sell mortgage is essentially a bridging loan – a particular form of finance that can be arranged much more quickly than a traditional mortgage and with a typical term of 1-3 years.
Interest on a bridging loan is normally more expensive than on a long term mortgage and is calculated monthly rather than annually. At the end of the term, when you sell the property, the loan is repaid in full.
Why would you need to use one?
There are a few reasons why you would need a bridging loan when flipping properties. Firstly it’s a matter of timing – bridging loans can take days to organise rather than months, making them particularly useful for quick purchases such as buying at auctions.
A buy to sell mortgage also gives you the flexibility you need to repay the loan after a very short amount of time. A traditional residential or buy-to-let mortgage will often include early repayment charges whereas a buy to sell mortgage is specifically for investors looking to sell and repay the loan after only a few months or years.
The condition of the property can also be a factor as standard mortgages can only be used to buy homes that are habitable, either for you or for tenants. Often if you are renovating homes for resale, you may be buying them when they’re not yet in a fit state to live in, including not being secure or not having working kitchens and bathrooms. A bridging loan can be used for a property that isn’t habitable, so gives you a lot more scope in terms of what you can buy.
Talk to a limited company buy to let mortgage expert.
We understand the challenges involved with limited companies entering the mortgage market, which is why we do everything in our power to give you the best rates and highest chance of approval. All our advisors are fully qualified and authorised and regulated by the Financial Conduct Authority under pi financial ltd,. Registered address: Morfe House, Belle Vue Road, Shrewsbury, SY3 7LU, Company number 3556277, FCA 186419.
While the process of securing a buy to sell mortgage will be slightly different for everyone, there are steps that everyone can take to get set up and ready to go.
Find a broker who specialises in buy to sell mortgages
A lot of the lenders offering bridging loans are not usually present on the high street and not easy to find without expert help, so finding yourself a broker who has knowledge of this particular type of finance and existing relationships with lenders is the smart move. They’ll be able to identify the right lenders, plus negotiate rates and terms on your behalf.
Map out your exit strategy
For a buy to sell mortgage your business plan and exit strategy are going to be key in terms of convincing lenders that you’re able to pay back the loan. Renovation schedules, costs and projected profit are all important and any previous experience you have as a property developer can also help lenders to feel confident in your plans.
Check in with your credit file
Although your credit record may be less relevant than if you’re getting a standard mortgage, it’s still important to know where you stand. Get a copy of your up to date credit report, check and correct any inaccuracies and share your findings with your broker. If any potential issues are flagged it’s much better to know about them in advance so that your broker can think about going to a specialist bad credit bridging loan lender.
Which lenders offer buy-to-sell mortgages?
While it may be possible to get bridging finance through one of the high street banks – the likes of HSBC, Santander or Halifax – this kind of finance is more commonly offered through specialist lenders and it will be these niche lenders that are likely to be the first port of call for your broker.
What are the eligibility criteria?
As with any kind of mortgage, your lender will have key eligibility criteria that they will use to decide whether or not to say yes to your mortgage application. There are some variations though between a buy to sell mortgage and a standard residential or buy-to-let mortgage.
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I didn’t think I needed a mortgage advisor as I thought all the good deals could be found on the internet. I was proved wrong! I can’t thank Lucy Jones at LG Embrey enough. A great mortgage deal plus cashback. Took all the stress out of sorting a mortgage. Highly recommended.
I cannot recommend Steve enough! I contacted Steve in April 2017 following a recommendation to advise me on getting a mortgage. I received a fantastic service from the start to finish of the process. Steve was extremely helpful, guided me and kept me updated throughout. Steve went above and beyond in my opinion and was extremely prompt. He is very down to earth, approachable and professional, which put me at ease as a first time buyer, and made the process stress free. When I come to remortgage, or require any further financial advice I would not consider using anyone else. Steve is excellent at his job, and genuinely cares for his clients and providing them a quality service.
After recently trying to sort through the myriad of offerings for Equity Release Lifetime Mortgages currently on the market I went to LG Embrey Financial ,and was very grateful for Steve’s expertise and help in coming to a decision. The whole process was made so much easier by Steve’s quick, sensible and professional approach.
Speak to an expert about a buy-to-sell mortgage.
We understand the complexities involved with property investors taking on bridging loans either as part of a self-build mortgage or development work with a view to sell property after project completion. Our independent mortgage advisers are able to provide the highest level of guidance on what’s involved in the process.
There isn’t a one size fits all solution when it comes to buy to sell mortgages and you may find, depending on your circumstances, that there is an alternative that’s a better fit for you.
If you know that your goal is simply to make improvements and resell then you wouldn’t qualify for a standard buy-to-let mortgage as you can only get this type of finance if you genuinely intend to rent out the property at least in the short to medium term.
Of course it may be that you really are in two minds about your longer term plans and want either to rent the house or even live in it yourself while you refurbish it, with the aim of then assessing your situation once the work is complete.
In this case you could use a buy to sell arrangement before remortgaging on to a buy-to-let or residential mortgage once all the renovations have been completed.
One other obvious option is to simply buy your investment property in cash if you have it available. This way you’ll incur no interest or product fees, you’ll simply pay for the property up front and then pocket any profits at the end. The only drawback to buying with cash can be the opportunity cost of having that cash tied up and unable to be used elsewhere.
Another possibility if you have an existing property portfolio and plenty of equity is to take out a secured loan or a remortgage against one of your other properties. Again, the viability of this will depend on your unique personal circumstances.
Speak to a buy-to-sell broker
As you can see, getting the best deal on a buy to sell mortgage isn’t simply a case of popping into your local bank – getting a mortgage for flipping is actually a lot more specialist and is best done with the support of a broker who has specific experience in buy to sell mortgages and bridging finance.
To speak with us please call 01743 382002 or fill out the contact form below and we will assess your individual circumstances and set up a no obligation chat with a broker who has the best skills match for you.
Can I get a buy-to-sell mortgage with bad credit?
Yes, having bad credit doesn’t have to mean you can’t get a buy to sell mortgage, but it may make it harder to find a lender or mean you have to pay slightly higher rates. However, unlike traditional long-term mortgages, credit history can be less important with short-term bridging finance as repayment depends on a robust exit strategy rather than the ability to maintain monthly repayments.
The content contained in this article is accurate to our knowledge and up to date at the time of writing. For the latest guidance please speak of the advisors. This site is not tailored to each reader so the information does not constitute as financial advice. All our advisors are fully qualified and authorised and regulated by the Financial Conduct Authority under pi financial ltd,. Registered address: Morfe House, Belle Vue Road, Shrewsbury, SY3 7LU, Company number 3556277, FCA 186419.
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LG Embrey Financial Planning is a trading style of pi financial ltd. pi financial ltd is authorised and regulated by the Financial Conduct Authority. pi financial ltd is registered in England. Registered address - Morfe House, Belle Vue Road, Shrewsbury, SY3 7LU, Company number 3556277, FCA 186419.