In his latest Q&A, Anthony Wright helps a reader who would like some guidance to buy a real estate to ‘do’ and rent out tenants
The question
My wife and I would like to buy a buy-to-long real estate. We are currently looking at ‘Doer-Upers’ and wondered if we could finance the renovation work with a buy-to-long mortgage or a short-term secure loan. We expect the work to take about six months to a year.
Anthony’s answer
Congratulations on thinking about taking your next step in real estate.
Buying a buy-to-long real estate is a slightly different process than a residence.
Buyers in your situation would usually not use a buy-to-long mortgage, you would use what one is called bridging loanwhich I explained in my last article.
It is a form of short -term financing for a year to 24 months that is used to buy the property. The lender will also release money for you to do renovation before you rent it out to ensure that it is on a rentable standard before your relocations have arrived.
The lender takes into account the amount of work via a ‘work schedule’ stated by the builder.
The method that you state to increase the financing is a secure loan or ‘remortGage’ on your homes (if you have equity in it). The lender takes your income and expenditure into account to create this loan, usually known as a ‘second cost’.
You can then use the funds to buy the property in full cash, or use it as a down payment, increase the remaining before the purchase and re -finance the renovation with development financing.
Both are possible options. The most important thing you should think of, if you take this route, is the type of project you are going for, the expertise of the builder and what you will do with the property at the end of the project.
Your options are usually to sell or refinancing the project at the schedule development value (GDV is the final value after works are completed).
Meet our expert …
Anthony Wright is a specialized development broker at Always Wright Mortgages Limited And every day he helps customers to get the best mortgages to finance their dream house, second home or buy-to-long portfolio.
With four years of experience in mortgages that collaborate with the top banks of the UK and his multi-award-winning broker, he is ideal to answer your questions. If you have a question about any aspect of your mortgage, send us a message in the comments below or e -Mail [email protected]