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Using further advances


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On a recent ask Rob and Rob podcast the guest talked about his strategy of buying, renovating and releasing equity after 6 months through a further advance.

 

This has made me consider my strategy and I'm wondering if I might be able to speed up my investment, but I have a few questions around further advances, and I'd appreciate any advice anyone can give me on this.

 

My current strategy has been to buy properties BMV that need a little bit of work, do the work and save the rental income and after two years remortgage at the higher value with maximum LTV. I then roll all of this cash into a fund to buy the next property.

 

So far that has worked and I've achieved the value I have been looking for upon remortgaging.

 

My plan is then to not take out any more equity from these properties for the foreseeable future so that as the properties go up in value they build in themselves a buffer against any future crashes.

 

I'm now considering speeding this up by (instead of waiting the two years for a remortgage) getting a further advance after 6 months so I have the cash to invest sooner. 

 

The questions I have about this are:

 

1. Am I likely to be approved for a further advance if the uplift is mainly from buying BMV with only a slight refurb? There are several comparables within a few houses on the same street that show properties being sold for the same amount or more that I'm asking for within the last few years. I'm just not sure if they're stricter about giving a higher valuation with a further advance after 6 months than with a remortgage with a different company after 2 years? (I invest in a high yielding area in the North East so there won't be an issue with rental income to repayment ratio)

 

2. Obviously I would then effectively have two mortgages on the same house ending 6 months apart. Am I right in thinking that this isn't a problem because I'm not planning to take out any more equity, so I can just keep taking out new deals with the same mortgage provider for each of the loans? Are there any potential downsides to this that I'm missing?

 

3. I normally use a mortgage broker (who is excellent) but should I save the fee and apply for the further advance myself since I know which company I'm going with, or do mortgage brokers do more than apply and would they actually increase my chances of getting the uplift in value through the way they make the application?

 

4. Should I expect to pay a higher rate for a further advance, or is it usually comparable to the original mortgage? What kind of fees would you normally expect to pay?

 

5. Is there anything I'm not considering in this that I should think about?

 

Thanks in advance for your help!

 

Scott 

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I would say (3) - stick with your broker, mine doesn't charge for remortgages after the initial purchase, but their advice in invaluable.  Don't cheap out, the advice of a good broker on all the surrounding circumstances in invaluable even if you think you know what you're getting into.  Every lender is different and they will know the pitfalls.

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Hi I'm applying a similar strategy to you buy, refurbish, refinance in Scotland

 

Using Ltd company and also in scotland so lenders more limited. 

 

My mortgage provider (Precise) don't allow further advances, I know some do so worth checking.

 

Another option is to buy cash (if possible), do the refurb and get the mortgage at the higher value in 6 months time. I've done this without any issues

 

All the best with the project

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