Funding a property bargain: £280,000 property refinance

Being able to move quickly and offer immediate funding can be a major asset in some sectors of the property market.

The ability to call on cash - to be a cash buyer - can mean the ability to secure a sale without the need to spend weeks or months arranging finance. For an experienced property professional, it also offers the ability to buy property that is not suitable for a mortgage because of its condition or other considerations.

The extra flexibility means that a cash buyer can often secure property at lower prices, and faster than would otherwise be possible.

At Rangewell we recently found a way to give a client cash-buyer status - although he had no cash of his own to call on.

The challenge

Our client was a buy to let investor who had a number of flats and small houses in and around Manchester. He had established his residential portfolio with a combination of savings and Buy to Let Mortgages, and was enjoying a steady income from his property business, despite the recent changes in the taxable position of BTL investments. 

He recognised the potential of a run-down property close to one of his existing properties. He believed that, if he could acquire it, there was profit to be made by letting it out to tenants, even if some repairs and refurbishments would first be required. 

The property was a small house which had been standing empty as the result of a probate dispute. It was in poor condition, which was unlikely to attract a mortgage until work was done to make it habitable. Repairs to windows and a new kitchen and bathroom would be necessary, and there was some damp damage to make good - although the house was structurally sound. 

The vendor was aware that his property was going to be a problem to sell, but was wary of putting it up for auction. Instead, he was prepared to take a cash offer.

“I knew the houses down that road, and I had a clear idea of what would be required to get it habitable. I could handle the work with my contacts in the trade, but I needed a solution that would make me a cash buyer - because the seller was only interested in taking cash and walking away as soon as possible.”

The problem was that our client had no cash to call on. His savings had all been invested in his existing properties.

In these circumstances, it may be possible to arrange a Bridging Loan, which can act as a short-term source of a high level of funding. Bridging Loans are short-term loans secured against residential or commercial property. They are relatively high cost, and intended to be repaid quickly, either by the sale of the property itself or by another finance product designed for the long-term, such as a mortgage. However, the costs involved are inevitably high, and our client was wary of entering into a loan arrangement without a clear exit route.

“Bridging Loans can work out expensive if you can’t pay them off.”

He turned to Rangewell for help.  

Finding a solution

We saw that our client’s real need was to be a cash buyer to secure the best deal on the house, and set about finding ways to provide the cash he needed.

We saw that his existing property portfolio could provide the answer - with a refinance arrangement.

As a property owner, you do not need to have paid off a current mortgage to arrange a new one. Your property will probably have appreciated in value, and this can mean that a better mortgage will be available.

How Mortgage Refinancing works

In simple terms, any Commercial Mortgage is a loan secured on your property assets. This security means that the risk to the lender is small, so the interest rate they charge can be reduced. As a result, the costs of a Commercial Mortgage can be among the lowest cost lending that is commercially available.

So, to raise cash, a Commercial Mortgage can be the most cost-effective solution available, especially with the current low interest rates and high property values.

It works by letting you take out a new mortgage on your existing property. If you own the property outright, all the money you raise is yours to use in any way you wish.

Could you raise the cash you need with a commercial remortage? Call us to find out more

In the case of our client, we worked with a specialist mortgage lender who could provide a new mortgage for his entire BTL property holding.

Such was the growth in property values that he was able to repay all his existing lenders, reduce his monthly repayments - and still release £280,000 in cash.

This was more than enough to buy the house he wanted and to fund the work required.

Our client bought the property at a substantial discount thanks to his cash buyer status - and with a new tenant now in place it has already begun to bring him in an additional income stream.

Do you need large scale property finance – and do you need it fast? Simply call us at Rangewell on 020 3637 4150 - or email contact@rangewell.com. Our service is free.