introducing steve mears – independent financial advisor the money man Looking at mortgage finance for auctions… Recently, we have seen an increase in the number of clients wanting to use a residential mortgage to purchase a property at auction. Whilst this is possible, it has built in pitfalls depending on the state of the property etc.
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The other obvious issue is that you really need a Mortgage offer before you can bid with certainty, and how do you know the price that will be agreed? It does become easier if you have a large deposit, however I felt it would be worth further explanation: Renovations If the property you want to buy is run down but habitable, most lenders will offer from 80-95% of its value as it stands. However, they may withhold some funds, known as a retention, pending the completion of essential repairs. The property will be surveyed and the surveyor will indicate any work necessary. The property may have to be re-inspected before the balance of funds is released, and there will be a fee for this. Typical works include damp-proofing, repairs to roof, re-wiring etc. Until the retention monies are released, repair works have to be funded by you. It is therefore vital to get accurate building quotes. Non-habitable Properties and Conversions For conversions and other non-habitable properties, the range of lenders willing to help is more limited. We can look at special self-build mortgages for you. Again, deposit is King! These lenders usually finance projects in stages. Giving you an idea of when further monies will be available. Each stage completed usually means another re-inspection and small fee. This needs proper planning and a very good idea of exact costs and timescales. Once the project is complete, we can look to re-mortgage away to a “Normal” mortgage of up to 90% of the value.
These types of scheme are usually offered by smaller lenders working with Specialist “packagers” which we have access to. Usually slightly more strict approach to lending multiples, especially for the self-employed. It is, as usual, imperative to speak to a good local Broker! If you own your own home or another property, perhaps a Buy to Let, we can also look at a re- mortgage to raise some or all of the funds required. Re-mortgaging is typically cheaper than bridging finance, but you must have sufficient income to prove you can afford additional repayments. However, it gives us the opportunity to maybe get a cheaper deal on your existing loan as well as a new one. We can also look at a further advance if your current loan is already on a competitive rate. If you have sufficient equity in your current home to fund the renovation, including the purchase, you could use a bridging loan . This is the most flexible lending available, however, Interest rates and set-up fees are higher, as it is a temporary product designed to be replaced with either a Sale or re-mortgage. Fees can sometimes be “rolled up”, thus aiding cashflow. As you can see, Buying a property at auction requires special financial arrangements, and you also need to act fast. Have a chat with one of us tonight or contact the office and arrange a meeting in our Alma Vale Road office . Happy Bidding!
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Please remember YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE .
to contact Steve, email info@stevemears.com , telephone 0117 973 4300 or to find out more about Steve Mears Independent, visit www.stevemears.com
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