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Very quick question please!


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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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Hi Ollie

I'm sure the brokers on here will tell you with more authority than me, but if you're buying with a standard BTL mortgage with the aim to refurb and re-mortgage in a short space of time like 3 months, then you're using the wrong mortgage product.  Standard BTLs are usually for long-term (e.g. 10, 20, 25 and even 30 years now) with the lender factoring in their profit over this period. If you then suddenly refinance it after 3 months, you might get away with it the first time but if you consistently do it, they'll add you to the naughty blacklist and remove all borrowing options for you in the future. You may also be exposed to hefty early repayment charges which will eat into any equity you've added.

If you wait the 2 year fixed period, then you might be alright as you tend to refinance at the end of fixed periods for better rates, and the lender may look at whether any equity has been built up to release more funds. 

If you're funding a purchase and refurb with the aim to refinance in the short-term, then usually cash (either your own or angel investors) or bridging finance are your most suitable options.

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Hi Ollie

I agree with Derek regarding the potential to be blacklisted.

Pre COVID there was a refurb to let product on the market which is essentially bridging finance and a BTL all rolled into one product. I believe fees are a bit higher and not sure if still available in the current climate but a product like this would be suitable for your plan. I would speak to a specialist broker for the correct product advice and there are a few good ones on here.

Can any brokers on here confirm if the product is still available and/or offer alternate funding suggestions?

Hope this helps

Gary

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Hi,

Just to add to this, what you can do quite legitimately is choose a lender who offers “additional borrowing” and then after 6 months (which I believe the the minimum) apply for additional lending with your lender post refurb. This is effectively an additional loan against the property to extract some of the equity built via the refurb and obviously relies on the valuer agreeing to the increased value you now put on the property. 
 

Hope this helps.

 

Nick

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