Buy To Sell Mortgage – How Much Can I Afford?

Mortgage Loan

For many, property investment can be an incredible way to enhance your portfolio, but some believe it only involves buy-to-let properties that build long-term income. There are, however, other options, like buying, renovating, and reselling properties as quickly as possible. In cases like these, buy-to-sell mortgage options are usually the best way to go, but what are they, and can you really qualify for one?

What is a Buy-to-Sell Mortgage?

A buy-to-sell mortgage is a fairly short-term loan that was created specifically for someone who wants to buy, renovate, and sell a property for profit. Most people call this practice flipping. It’s a kind of loan that has a term of just a couple of years. The interest on a buy-to-sell mortgage in the UK is usually a bit higher, and it’s calculated on a monthly basis. You’ll also need a fairly large buy-to-sell mortgage deposit, typically somewhere in the neighbourhood of 25%.

The Costs Add Up

A buy-to-sell mortgage certainly isn’t cheaper, which leads some to wonder why you might try this part of a property investment at all. Is a buy-to-let mortgage cheaper? Absolutely. They’re usually just slightly more expensive than residential mortgages. The problem with this type of mortgage, though, is that like a residential mortgage, they often have early pay-off fees, and those can really add up if you’re trying to renovate and sell quite quickly.

How to Get a Buy-to-Sell Mortgage

If you think flipping a property might be the perfect way to add to your portfolio, a buy-to-sell mortgage really is the way to go, even if you don’t want to deal with the higher overall fees. Keep in mind, though, that they aren’t widely available. Most lenders only offer traditional mortgages, so you may need to work with a mortgage broker to find a team to meet your needs. Before you even meet with a lender, though, you’ll want to have a clearly defined business plan and exit strategy, as they will immediately want to know that you will be able to pay back the loan. Keep in mind that you’ll want to include your renovation schedule, what it might cost, and what you expect to make during the entire process. It may also help to include your experience as a property developer to help a lender feel more confident with your plans. Finally, take a hard look at your credit before you talk to a broker. Your credit record will be slightly less relevant in this case, but it’s essential to understand where you’re at before you speak with a lender. If there are potential issues, be sure to discuss them with your lender before they pull your report so they’re not surprised at the last possible second. Keep in mind that you likely will have a lower maximum amount you can borrow than you would with a normal mortgage, too, so you’ll want to consider that before you apply for a loan.

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