I am looking for a long term Buy to Let strategy buying about 15 properties over the next 18 months/two years.

Posted on 17 January 2008

Hi Katie,

I am looking for a long term 'Buy to Let' strategy buying about 15 properties over the next 18 months/two years.

1. What products do you have available where I can release capital growth EACH and EVERY year without any penalties? [as long as the rent stacks up and the capital grows of course] e.g. Property value now = £100,000, in one years time say the value goes up 10% to £110,000. Can I release 2% - i.e. £2000 without any penalties/fees?

2. Will I know what the property is going to valued at after completion before exchange i.e. If the property is going to be valued at 15% above purchase price, will I know this before the exchange?

Kind regards,

Marc

Hello Marc,

I must say, I'm surprised in the current climate that you expect property values to increase.  This 'gearing up' on investment properties was certainly a great strategy for the last five years but goes against most of the market's expectations currently for 2008 and 2009.  Indeed, most lenders have in fact cut their maximum loan-to-value limits to 75% for new build flats, as they have been so grossly overvalued and a (downward) correction in value is underway. Another idea is to keep part of your cash deposit safe for a year or so, and see whether prices fall to the extent where you could get a bargain.  But unfortunately I have no crystal ball either.
 
Here is some inforamtion if you do decide to proceed.

Most lenders will allow further advances to take capital out, and any product that has no Early Repayment Charges (Tie-ins) will allow remortgaging as frequently as you like. A further advance is normally forthcoming for only an administration fee from your lender of around £50, but a full remortgage to another lender would incur the full product fee.

To use purely the value increase to draw equity out would require that the property increase substantially in value annually, as mortgage fees are now in the thousands, or the rate is so high that the rent struggles to cover. It looks as though you intend to 'gear up' your initial debt as high as possible.

In terms of the valuation, yes you would know at the very start of the mortgage application what the valuation would be.  But to save you time, I can advise you that the valuation is restricted by the lender, to no more than the purchase price.  Buying at a 'discount', but claiming the property is in fact worth more, and is not really taken seriously by lenders these days.  The only chance you have for this is to prove using three 'comparables' from a local estate agent, that similar properties, in the same area, have already sold, for the higher price. The valuer might take these into account, if you are lucky, and then the lender, if you are really lucky.  Your only hope really is to use a broker with a good relationship with a surveyor, who will also use a lender who can lend against "value", not "purchase price".  There are only two or three lenders who can do this but a broker to work out which ones can consider you.

Best of luck with it.

Category: Buy-to-let, Current rates & the market

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