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bradleywood

Funding Buy, Renovate, Refinance

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Hi,

I’ve got a quick question about the funding of a BRR project.

When I come to refinancing will the lender question where I got the funds for the purchase/renovation from?

An example just to add some context:

£90,000 - Purchase price

£5,000 – Costs

£10,000 – Renovation

£105,000 – Total spend

 

£120,000 – Final value

£90,000 – Borrowing at 75% LTV

£30,000 - Equity

 

£15,000 – Funds left in the deal

 

The funding for the initial £105,000 would probably be approximately £50,000 personal funds & £55,000 from parents/grandparents. Would a lender question this? Should it all be my own funds? Also, the deal would be within a limited company with myself as sole shareholder & director.

Also, in that example the money left in the deal would be all mine so would this help?

Thanks!

Brad

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Well as its Ltd you will have to loan the 105k to your company as a directors loan - into a company account. You then do the buy/refurb and the mortgage will be a ltd company application - at no stage will the mortgage company ask you where you got your initial funds from. I have done this 3 times and its never come up. Whats more likely is that your solicitor, as part of money laundering regs, will ask you wher eth emoney came from and you can say savings/family and thats fine. You should have the money in your or company account for 3 months otherwise the solicitor will ask more questions.

Thats my experience anyway

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Hi Haf,

Thank you for your insight. That's exactly the approach I was going to take in terms of the director's loan into the company but it's good to know that a lender would dig much deeper than the fact that the company already owns the property. Also, thanks for the heads up with the solicitors, I'll be fine with proving source of the funds but assuming it doesn't actually need to be in the company account for 3 months? As in, if the money has been in my personal/my parents account for 3+ months and then they transfer to the company account that should be fine? As they can see the build up and source of funds.

Thanks,

Brad

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