Many are the time that I have been asked if you can use a BTL mortgage to flip property. As with many things the answer is in the question. It is a BUY TO LET mortgage! The clue is in the name. If you could use a BTL mortgage to flip a property, then don’t you think it would be called something else like for example a BTF mortgage?
But I hear you ask - how is the lender going to find out? I mean if I pay the mortgage on a monthly basis then surely that is all that the lender is concerned about.
No!
You have obtained a mortgage with false information. In particular, false information about the term of the loan.
The lender may not find out the first time that you do it but did you know that just like the insurers the lenders talk to one another. They share data. They can easily instigate a search over the historic lending that you have taken and if you have done this before then the evidence will be laid to bear in front of you.
The consequences are stark.
Let’s start with mortgage fraud. A criminal offence and whilst you could argue that your circumstances have changed and it was always your intention to let the property out, the facts including conversations with the broker will bear out your true intentions. If you have lied on the term of the loan to obtain funds, then that is serious.
Even if you are not convicted then there is every likelihood that you will be blackballed from lending institutions from other finance. I spoke to a BDM recently and he had seen this happen where it had been clear what was going on from the “chain of events”.
The consequences are also stark for any broker who is involved. The lenders will instigate a search amongst all lenders to see if there are any other instances of BTL mortgages being used for Buy to Flips where that broker has instigated the application. In the case above there had been a trail of similar instances. The outcome was that the broker is likely to lose their job.
So, if a BTL mortgage is not the route for flipping a property then you need to look at bespoke finance packages from institutions like Lend Invest and Together will offer bespoke bridging deals that will typically start at 0.75% per month.
Another alternative is to find cash from somewhere else. “Joint Venture” capital is the name for that where you find an investor who has sufficient funds to buy the property. You do the refurb, and the property is sold with an agreed percentage of the return going to the investor. If you do that a number of times you should have enough to go it alone with your first cash purchase where you can buy the property cash, refurb it then get a Day1
remortgage to capital raise the deposit for the next project. Rinse and repeat and you are off and running.
If you are going to flip property, do it properly.