Buying BMV doesn’t mean a full value mortgage

THE QUESTION

I've sourced a 20% BMV deal and am wondering if it’s possible to get an interest only mortgage for the purchase taking into account 80% loan-to-value, so I can purchase with a smaller deposit?

THE ANSWER

You are on a loser if you want to get a mortgage lender to lend against value and ignore the purchase price - at the point of purchase they never do.  It is always the LOWER of purchase price or value.

However, some, but not all, bridgers will lend against the value and sometimes up to 75%, but it is often not quite as simple as that.

One key factor is whether the property is or has been marketed by an agent or not. Using the example of you think the true current value is £100k but you have negotiated to buy it for £80k. If it has not been marketed a bridgers valuer may (but there’s no guarantee) value it at £100k.

However, if it has been marketed and say the asking price was £85k, then valuers would override your idea its worth £100k and value it at £85k at best. In other words, you will never get a valuation in excess of the asking price, even from bridgers.

The other key point is about refinancing onto a mortgage at the full market value. The issue here will be what work have you done to the property since you bought it 20% BMV?

If you have done nothing to it, you have zero chance of getting it valued above the purchase price you paid and the reason is simple.  No mortgage lender’s valuer recognises buying BMV, in isolation, as a credible reason to value above purchase price paid.

There is only one way to get a subsequent valuation above purchase price paid; do something to the property that valuers recognise adds value.  Usually that means refurbing the property.

We have brokered hundreds of bridging loans, including borrowing 90%, 95% of the purchase price in the scenario you describe, so can give you all the help you need in this matter.

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