How do you unlock funds for new property purchases?

THE QUESTION

I have a BTL property owned for 3 months which has 2 years ERC on it so I don't want to remortgage, but can I use the property as a security to buy another refurb property.  The property was originally purchased on a 75% LTV BTL mortgage, but has been re valued after refurb works and is now at 57% LTV.

Ideally I want to get on with buying and refurbing another property which would be a buy to sell; I have the finances for the refurb, but not the deposit. The properties I am looking at are low value ballpark PP 65-70k and the deposit I am looking for would keep the security property around 70%-75% LTV.

THE ANSWER

If you want a bridger to lend on a second charge basis they will go to 65%, less costs. So the most you will get is 8% less costs.  Based on your figures, you won’t be able to release enough for the deposit.

However, there is another way to structure this. Use part of the money for the refurb for your deposit instead and then use a bridger that will lend for the refurb. This is done in stages, in arrears.

The bridgers that do this will require you to use your own cash to fund the initial part of the refurb. That will add value, their surveyor re-inspects to confirm the added value. Based on the higher value the lender will release further funds to continue the refurb. This may be enough to complete the refurb or you may need to repeat the process to release a further tranche of cash.

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