What is a buy to sell mortgage?
A buy to sell mortgage helps people buy properties they will renovate and sell for a profit. It is also known as a fix and flip mortgage or ‘property flipping’.
Essentially, it is a type of bridging loan, which is a short-term funding option focused on helping you ‘bridge the gap’ between buying a house and selling it.
It can be an attractive option to those with experience in property development, as well as investors looking to expand their portfolio.
How do buy to sell mortgages work?
With this option, you borrow money from a lender and will need to repay it within the agreed term. However, unlike other loans, you will repay the full balance at the end of the term, rather than making monthly repayments. Having a clear plan to repay the loan is therefore vital.
Just like secured loans, a property is used as security against the loan. This could be an existing property you own or the one you are buying. Due to this, if you do not repay your loan, your property could be repossessed.
With short-term finance, interest rates are usually higher, so it can be more expensive than other funding options. That’s why it’s a good idea to think carefully about your options before you make any decisions.
Here's how buy to sell mortgages work:
Find a property
Find a house or flat with potential, such as those in need of renovation. A good place to look is property auctions, which often have below-market value houses and flats.
Apply for a loan
Apply for a buy to sell mortgage with a lender or broker. They will assess your application, taking into consideration your credit history and experience in this area.
Get the house or flat valued
A valuation is the process of determining the estimated market value of a property. The valuer considers things like the property's location, size, condition, age and features. Also, they will consider the predicted value of the property after the works have been completed. This will help to tell lenders how much you might be able to borrow.
Start the renovations
If you get accepted for a loan, you can use the funds to improve the property. This may involve hiring contractors, getting permits, and managing the process within your budget and timeline.
Get selling
Once you have completed the work, it’s time to try and sell the property. Try to sell it at a price that covers all your costs and generates a profit. When the house or flat is sold, you will use this money to repay your loan.
Minimum requirements for buy to sell mortgages
To get a buy to sell mortgage, you must be at least 18 years old and have found a property that meets the lender’s requirements. Lenders may have other criteria you need to meet, but this can vary depending on which provider you go with.
Also, you will need to have a clear repayment strategy in place, showing how you will repay the loan. This could be selling the property or refinancing. Without having a clear plan, lenders are unlikely to accept your application.
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Don't forget – making an enquiry will not affect your credit rating in any way!
Tips for renovating properties
Renovation is a key step in this process. By doing this, you can increase the property's value and attract buyers.
Here are some key points to consider when you’re renovating a property:
Make a clear plan
Develop a clear plan. Consider your target market and current trends to make sure the renovations align with your ideal buyers. The last thing you want to do is make changes that will put your ideal buyers off.
Budget carefully
Set a realistic budget and make sure you stick to it. Take into account the purchase price, renovation costs and any other expenses. If you want to make a profit, this is a key step.
Focus on repairs
Address any structural issues or repairs before looking at cosmetic changes. Buyers are likely to be attracted to properties that are in good condition, rather than houses that look nice but have serious underlying issues.
Improve curb appeal
First impressions matter, so make sure you invest in the exterior appearance of the house to improve the property's curb appeal. A well-maintained exterior can increase buyer interest and perceived value.
Choose materials wisely
Go for high-quality materials that provide value for money. Consider factors such as longevity, maintenance and aesthetics to make informed decisions.
Marketing tactics for selling properties
When it comes to selling your property, it’s a good idea to think about how you will market it. Effective marketing can help you attract buyers.
Consider the following tips for marketing your property:
Professional photography
Hire a professional photographer to get high-quality images that show the property's best features. These images will be crucial for online listings.
Think about your listing descriptions
Write engaging and accurate descriptions that focus on the property's unique selling points. This could include its location, amenities and recent renovations. Use descriptive language that grabs the attention of buyers.
Open houses and viewings
Organise open houses or scheduled viewings. This allows potential buyers to experience the property first-hand. Make sure the property is clean and well-staged during these events.
Work with local agents
Work with good local estate agents who have a strong presence in the area. They can help market the property to their network of buyers and use their expertise in negotiating and closing sales.
Advantages of buy to sell mortgages
Profit potential
The main advantage of buy-to-sell mortgages is the chance to make a profit. By finding undervalued or distressed properties, you can renovate them to add value and sell them at a higher price. If you budget carefully, you may be able to make a profit on this.
Short-term investment
These are short-term investments, which typically last up to 24 months. This fast turnaround means you can quickly move on to your next project.
Property market expertise
Buy-to-sell projects can give you valuable insights into the property market. Through experience, you can get a better understanding of property values, market trends, and other potential investment opportunities.
Disadvantages of buy to sell mortgages
Renovation risks and costs
Renovating properties can be hard and you may have unexpected issues. Due to this, costs can easily increase, which may affect your profit.
Market instability
The market is subject to ups and downs. Changes in demand, interest rates, or housing market conditions can affect property values and profit potential. If you fail to sell your property and are unable to repay your loan, it could put your property at risk of repossession and may harm your credit score.
Compliance
Working on these projects has legal obligations. For example, you must follow building codes, get planning permission, follow landlord regulations, and meet other legal requirements. If you don’t, it can lead to fines.
How to apply
Applying for a buy to sell mortgage is easy. We have simplified our application process to ensure you get advice from an expert as quickly as possible.
Here’s what our process looks like:
Prepare your application: Decide the amount you need to borrow and your desired loan term. Also, consider how you plan to repay the mortgage.
Make an enquiry: You can fill out the online form above, and one of our advisors will promptly call you. Alternatively, you can call us directly at 0800 032 3535 to speak with an advisor.
It’s over to us: We will search our database of lenders to find the best deal we have available for you. If we find a product and you're satisfied with it, we can proceed with the application process and get you the funds as soon as possible.
