In the world of property sales in the UK, there are many different financial instruments investors can use. While some use all cash to make it happen, many others use a mortgage. A buy to sell mortgage is a type of mortgage that is specifically designed for property investors who want to purchase a property, make renovations, and sell it for a profit. This type of mortgage is also known as a bridge loan, property development loan, or property renovation loan. Like any other type of mortgage, a buy to sell mortgage has its own set of pros and cons that property investors should consider before deciding to use it for their investment strategy. Is it the right strategy for you? Take a look.
The Benefits of The Buy to Sell Mortgage
It may first help to consider the benefits that push so many to use this type of mortgage. One of the biggest benefits is the instant access to funds it provides. A buy to sell mortgage gives property investors direct access to the money they need to both buy the property and renovate it. This can be especially beneficial for investors who may not have the cash reserves to purchase a property outright. There’s also the real potential for some very high returns. This is because they can purchase a property that needs renovations at a lower price, make the changes they want, and then sell house quick for a higher price. If they were relying on cash, they may not have quite enough left to renovate it.
There are other benefits, too. There’s some flexibility involved with these kinds of mortgages. Buy to sell mortgages offer options when it comes to repayment. For example, investors can choose to repay the loan in full once the property is sold, or they can make interest-only payments during the renovation period. Many have no early repayment charges. This means that investors can repay the loan early without incurring any additional fees.
Are There Drawbacks?
For as many benefits as there are with buy to sell mortgages, there are some real drawbacks to this financial tool. Buy to sell mortgages typically come with higher interest rates than traditional mortgages. This is because they are seen as a higher risk by lenders as the property may not sell for the desired price, or the renovation costs may be higher than anticipated. More …