How to buy investment property with no mortgage

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How to buy investment property with no mortgage

As many of our investors are aware, knowing how to buy investment property with no mortgage is one the biggest challenge of buying an investment property, as is securing a mortgage which requires a low deposit. The current situation on buy to let lending is dependent on the anticipated rent of the property; which should cover the mortgage repayments by at least 145%. This ratio determines the Loan to Value (LTV) the bank will offer. Generally the higher the rent coverage, the more lending the bank will give, and the less deposit the investor will need to put down. The lower the rent coverage, the higher the deposit the investor will need and the less the bank will lend.

Over the years, all lenders have been increasing the ratio of rental coverage in order to reduce the “risk” from the banks point of view. Usually a lender is happy with a 70% LTV, which means that the investor puts down 30% and the balance is financed by a mortgage, only if the lender is satisfied that there is a 145% rental coverage. Inevitably, this has priced many would be property investors out of the market because they simply don’t have the large lump sum deposit available to secure a mortgage, especially when you consider the typical associated buying costs like stamp duty and legal fees as well.

As a typical example, a property which is £100,000 say, the amount of deposit required would be £30,000 plus stamp duty and legal costs. Therefore a property investor would need to invest around £33,000 to £34,000. If they don’t have this kind of money, then they cannot proceed with their property investment.

We have a solution which overcomes this problem

Because of our reputation as one of the finest property investment companies in the UK, we have been able to tie up with an innovative developer who will allow the following:

  1. Spreading the 30% deposit over the 2 year build period in monthly payments with no lump sum up front. This means that on any of their off plan developments they will work out an easy monthly payment plan (with no interest or credit checks) so that you can spread the 30% deposit over a period of time with the balance of the 70% financed through a mortgage near the time of completion – which we will help to arrange for you if you like.
  2. On some of their developments, they will offer a “No Mortgage Option”. Here the investor can pay 50% of the value of the property in 24 monthly payments (circa £2000 per month) with the balance of the other 50% paid by the developer on completion on your behalf. The developer will then recover the 50% paid through the rent that the property receives. Again there will be no interest charged and no credit checks done. In both the scenarios above, the investor will be the 100% owner of the property and is free to sell the property at any point, even during the repayment period.

What happens next

We are really excited about this relationship because it provides a really flexible and unique way investors can buy properties with no money down. It also opens the door to many would be investors who may not have the initial lump sum up front deposits or those who may not get favourable terms for mortgage finance due to a low credit score. Remember with the “no mortgage option” there is no mortgage interest to pay, no credit checks and any mortgage applications and associated fees to pay!

During the course of the next few weeks we will be launching some really exciting schemes which can be financed in one of the two ways described above. Rest assured, these schemes will be in outstanding growth areas capitalising on the key investment criteria we look for when adding value to your investments. They will come with the usual guarantees and warranties which are associated with new builds to provide that extra peace of mind.

If you want further information or want to be kept updated with investment opportunities that you can buy through this method then please contact jay.parmar@tarquinjones.com or phone 020 8445 6542

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