Young naive mortgage information required

[True]

alright,

I am 20 got about 200k looking to invest for >30% active ROI. I am interested more in capital gains than passive income and am just looking for a bit of information on the current procedures and percentages for short term project mortgages.

For instance, I buy house A that is currently under appreciated, spend 2-4 months on the property and then look to sell on quickly or perhaps rent dependant on market etc etc.

What are the kind of minimum, standard and cost effective/high deposit requirements to do this :

e.g. is the minimum I need anything close to 10/20% for this kind of project or am I going to have to get closer to 50/90%?

Thank you for your time.

[Matt Churchill]

Depends on how much you want to spend on the finance costs. I am assuming that you are looking to refurb during the 2-4 months?

If you go to a traditional commercial high street lender, you would something like 70% land and 65% refurb costs (albeit some do 75% and 75%), this is generally speaking and depends on values.

Alternatively, a merchant bank may give you 60% of end value less 100% of build costs (which they also give you), so depending on what the end value would be, you are left not needing to put a huge amount in.

Naturally, the second lender charges more as his risk is greater and he is putting in more cash.

This makes sense to me, but maybe an example would help (not based on anything in particular)?
House cost - £200k, refurb cost £50k. end value £350k.

Lender A does £150k land and £37.5k refurb (on 75% each), meaning you need to find £62.5k.

Lender B does £210k (60%) meaning you need £40k.

A very simplistic way of looking at it I know, but gives you a feel for it. Also, some lenders will not do as much as 75% land and 75% build.

Other options are buy on a BTL now, improve it and remortgage when done to repay expenses. Or if value stacks up, get BTL for enough to cover expenses.

Hope this helps a little and is the sort of info you were after.

[Colincbayley]

Depends on how much you want to spend on the finance costs. I am assuming that you are looking to refurb during the 2-4 months?

If you go to a traditional commercial high street lender, you would something like 70% land and 65% refurb costs (albeit some do 75% and 75%), this is generally speaking and depends on values.

Alternatively, a merchant bank may give you 60% of end value less 100% of build costs (which they also give you), so depending on what the end value would be, you are left not needing to put a huge amount in.

Naturally, the second lender charges more as his risk is greater and he is putting in more cash.

This makes sense to me, but maybe an example would help (not based on anything in particular)?
House cost - £200k, refurb cost £50k. end value £350k.

Lender A does £150k land and £37.5k refurb (on 75% each), meaning you need to find £62.5k.

Lender B does £210k (60%) meaning you need £40k.

A very simplistic way of looking at it I know, but gives you a feel for it. Also, some lenders will not do as much as 75% land and 75% build.

Other options are buy on a BTL now, improve it and remortgage when done to repay expenses. Or if value stacks up, get BTL for enough to cover expenses.

Hope this helps a little and is the sort of info you were after.
Which lenders offer such a scheme?
Will a BTL lender offer a loan that will also cover expenses?
I have had trouble in the past with buyer property below market value, giving them a make over then re-financing.
I am looking at deals at present where I am buying a property with a bridging loan then re-finance onto a standard buy-2-let at true market value.
Is there anothe way?

[Matt Churchill]

Which lenders offer such a scheme?
Will a BTL lender offer a loan that will also cover expenses?
I have had trouble in the past with buyer property below market value, giving them a make over then re-financing.
I am looking at deals at present where I am buying a property with a bridging loan then re-finance onto a standard buy-2-let at true market value.
Is there anothe way?
Which scheme do you mean? High street banks will do the first variant (the Lloyds, Barclays etc etc of the world), but it will be their commercial lending departments. Issue here is that they will need some evidence of your experience in similar circumstances. Merchant banks will do the 2nd version.

When I said about using a BTL lender and a "normal" BTL loan, I was more meaning in the circusmtance where the property value had some slack in it.

The first of the options I quoted is effectively a bridging loan, in as much as you cover interest but make no repayments, at the end of the term you sell or switch to a BTL loan.

True market value is a strange concept. If you pay £100k for a property which needs work, it is worth £100k, if after work it is worth £150k then that is what it is worth at that time.

The issues you have around buying with a bridge and then remortgaging with a fresh valuation is whether the lender discovers you have just done it. Also, lenders go to the lower of what you are paying and what it is worth unfortunately:(