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Buy, Refurb, Refinance Process - Easy Q for many i think! But i need help :)


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Hi all and happy new year!

Looking over the BRR strategy.....a quick question for anyone who might know the answer.

How quickly can you refinance and pull your initial investment back out?

If i buy a house in Jan, with a BTL mortgage, complete the refurb by March ready to rent out...can I re-finance that soon or do you need to wait out the initial fixed period of say 2 years?

I know you probably don't need to wait til the end of the fixed period, but not found any info on the typical process.....or do you pay exit fee etc?

Thanks Hubbers! 

Ollie

 

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  • 2 weeks later...

Hi Ollie,

That's not usually how investors execute the BRRR strategy. Commonly, bridging finance is used to buy the house in January, not a standard BTL mortgage. The reason for this is BTL lenders don't like investors refurbishing a property using this type of finance. It's yet another weird restriction that became common in the lending market after the GFC. Indeed, this restriction caused the proliferation of bridging finance that we see today!

Indeed, there is nothing stopping you from using a BTL mortgage for this acquisition in January. You have two options:

  1. ask for additional borrowing in March
  2. refinance as usual in March

If you go for option 1, you'll find that the lender looks at your property, realises that you refurbished it and declines your request. In option 2, you'll have to pay an Early Repayment Charge to get out of your January BTL mortgage before the end of the fixed rate period. I'll leave you to research ERCs.

Let me know if you have any other questions.

Cheers,

Arjun

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Hi Arjun, 

Thanks a lot for your response, much appreciated. That makes sense using the bridging. I suppose it would make sense to workout if the early repayment charge was less than the costs overall for the bridging and see which works out most cost effective. I know bridging tends to be more expensive. I wasn't aware lenders typically don't like you using BTL for BRRR option, although i didn't consider just asking for additional borrowing anyhow. I assumed perhaps people were perhaps not using a fixed mortgage and that way refinancing straight away, or like you say paying the early repayment charge etc. But all makes sense, appreciate your time in responding. 

Cheers,

Ollie

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