Using the same mortgage again and again

[shina]

Hi,

If an investor want to invest in properties and to use the same mortgage again and again, how long time can he do that and is it legal? for example, If it's a first time buyer and he's getting a mortgage from the bank as a first time buyer saying he intend to live in the house but all his purpose is to renovate, sell and make a profit, and then move on to the next house and do the same thing again and again. is it legal? and if so, how many times can he do that? until the bank will figure out this is what he's doing? or is the bank will play the game as if they don't know the truth and let him do that again and again as they are making money here anyway.

Thank you

 

[nmb]

Surely any mortgage lender would have first call on the initial property and therefore require repayment of the outstanding mortgage in the event of a sale?

 

[shina]

Thanks nmb,

Of course, I'm not talking about situation like that, I'm talking when the first property was sold, the mortgage debt was paid to the bank and then the day after the investor decide to look for another property saying to the bank he intend to live there but actually he has no meaning to do that but only to renovate,sell on and get the profit and then again and again.would the bank eventually say something looks fishy here and won't approve the future mortgages? or will he play the game like he's really think you're going to live in the house while he knows you're only intend to renovate and sell on? can I do something like that over and over again? or is it E legal? or is it customary to do that?

 

[nmb]

Sorry @shina I misunderstood your question.

I think once you start diverging from the truth on your mortgage application form then you are starting to get into trouble waters. Would it not be best to arrange some kind of flexible long-term mortgage allowing you to buy, redevelop and sell properties without having to close down each arrangement and then apply again?

 

[shina]

Thanks you nmb,
I know what you mean, I also think it's best to stick to the truth.
I've asked the bank if they have something like what you've mentioned (flexible long term mortgage) and the mortgage adviser replied with " we don't do things like that", she also said, "if you do something like that it consider to be a business and therefore you'll need a commercial loan" do you know what she meant by that? and how do I get this kind of loan? and can i release equity after renovating? same as mortgage?

Thank you

 

[nmb]

It looks as though a commercial loan would make sense because all you would do is put down any property assets you acquire as collateral. As and when you buy and sell properties in the future you would simply switch the collateral from the property you were selling to the property you were buying. This would allow a long-term commercial loan to continue without any termination fees or set up fees.

 

[shina]

Hi nmb,

So, I've spoke today with one of the leading banks in the Uk saying I'm interested in commercial load for real estate purposes and what they said was that if you want to get money for property investments as a loan you should have the same amount of money you are borrowing in your bank account, say, if you want to borrow 100,000£ you should have/deposit 100000£ in your business bank account before hand. so, following what I wrote how can I get a commercial load if I only have the deposit??!! or I missed something. the lady from the bank suggested buy to let mortgage.

Thank you

 

[Nicholas Wallwork]

Hi @shina

You can do what you're saying perfectly legally and not breaking any mortgage terms as long as the property is your main and only residence and isn't let out without permission.

So if you are just renovating what is effectively your sole home whilst living in it then this is perfectly fine! Many people do this when they get into property... Don't let it out though without permission as that will almost certainly be against your mortgage terms.

If it's a second home then you're best bet is either a buy to let loan (if the property is in good enough condition) or a development loan (of it needs more substantial works) which can be also low as 50% LTV as you mentioned for a commercial development loan.

I hope that answers your question...

 

[nicole2403]

I agree with Nicholas, as I am planning to do the same, we are in rented at the moment so planning to purchase our first project soon, we may or may not move into it but it will be our main mortgaged residence, from the reasearch ive done it is perfectly legal.