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What is Below Market Value Finance?
Below Market Value (BMV) finance refers to loans that help buyers purchase properties priced lower than their market value. This type of financing is especially popular in real estate auctions, where investors can find great deals.
When a property is valued below its actual worth, it presents an opportunity for potential profit. Investors often use BMV loans to secure these assets quickly, allowing them to act fast in a competitive market.
How Do Below Market Value Bridging Loans Work?
Below Market Value bridging loans provide quick financing for purchasing properties priced lower than their market value. These loans are especially useful in competitive environments like auctions, where speed is essential.
The process begins with identifying a suitable property. Once an investor finds a BMV asset, they can apply for a bridge loan. A lender will assess the property’s valuation through a real estate appraisal to determine its true worth. This helps establish the loan-to-value ratio, which indicates how much cash can be borrowed against the property.
After approval, funds are typically released quickly, allowing the buyer to secure the property without delays. The loan covers the purchase price and any associated costs, such as fees for solicitors or surveying.
Investors often use these loans for various strategies, including flipping properties or buy to let investments. The goal is to renovate and increase the property’s value, leading to potential profits when selling or renting.
What Are the Features of Below Market Value Bridging Loans?
Higher Loan Amounts
Borrowers can access funding based on the property’s open market value, often securing up to 75% of this amount, even if the purchase price is lower.
Quick Funding
These loans are designed for fast transactions, allowing buyers to purchase a property quickly, especially in competitive auction settings.
Support for Distressed Sales
Ideal for properties sold by motivated sellers, these loans facilitate quick purchases that may involve significant discounts.
LTV Considerations
The loan-to-value (LTV) ratio is calculated based on the property’s valuation rather than just the purchase price, providing more financing options.
Exit Strategies
Investors can plan to refinance or remortgage the property after improvements or value increases, ensuring a smooth transition to long-term financing.
Ideal for Buy-to-let Mortgage
This type of loan supports landlords looking to expand their portfolios by purchasing undervalued properties for rental income.
These features make below market value bridging loans a powerful tool for anyone looking to invest in real estate effectively.
What Are Below Market Value Bridging Loan Interest Rates?
Below-market-value bridging loans often have higher interest rates than traditional ones. They serve as short-term financing, enabling borrowers to buy properties for less than their market value.
You can expect interest rates between 0.5% and 2% per month. These rates depend on the lender and the property’s value. Lenders look at the loan-to-value (LTV) ratio, which compares the borrowed amount to the property’s worth.
A lower LTV can mean better rates, as it shows less risk for the lender. When considering a bridging loan, having a clear repayment strategy is crucial. This might involve selling the property or refinancing. Such a strategy reassures lenders and can help secure better interest rates.
FIND OUT HOW MUCH YOU CAN BORROW
Curious about your borrowing potential? Use our below market value bridging loan calculator to see how much you can access for your property investment.
Can I Get a Bridging Loan for Below Market Value Property?
Yes, obtaining bridging finance for below market value (BMV) properties is possible in the UK. Having a clear exit strategy is essential when applying for this type of finance. Lenders want assurance that you have a plan to repay the loan, whether through selling the property, refinancing, or generating rental income.
If you’re considering this route, it’s wise to get in touch with experienced bridging loan brokers who can guide you through the process and help you find the best terms.
How to Apply for a Below Market Value Bridging Finance?
Applying for a below market value bridging loan involves several straightforward steps. Start by identifying a reputable bridging loan lender that specializes in this type of finance.
Here is the BMV bridging loan application process:
01 GATHER YOUR DOCUMENTS
Prepare essential paperwork, including proof of identity, property details, and any valuation reports. This information helps the lender assess your application effectively.
02 CONTACT A BROKER
Getting in touch with a finance broker can simplify the process. They can guide you through the options available and help you find the best lender for your needs.
03 PROPERTY VALUATION
The lender will evaluate the property’s open market value to determine the loan amount. This is crucial since the financing is often based on this valuation rather than just the purchase price.
04 DISCUSS LOAN TERMS
Review the terms offered by the lender, including interest rates and repayment options. Understanding these details will help you make an informed decision.
05 SUBMIT YOUR APPLICATION
Once you have chosen a lender, your broker will assist in submitting your application. They will handle the communication with the lender and keep you updated throughout the process.
06 RECEIVE YOUR FUNDS
After approval, funds are typically released quickly, allowing you to purchase the property without delay. This speed is especially beneficial in competitive markets.
07 PLAN YOUR EXIT STRATEGY
Have a clear plan for repaying the loan, whether through selling the property or refinancing with a buy-to-let mortgage later on.
Following these steps will help ensure a smooth application process for your below market value bridging loan.
Why Choose Expert Mortgage Brokers to get a bmv BRIDGING LOAN?
For below-market-value property investments, bridging loans can be a game-changer. These short-term, fast financing solutions are perfect for bridging financial gaps. Learn how our expert bridging loan brokers streamline the process, helping you secure a deal tailored to your unique requirements.
Tailored Solutions
We assess your financial objectives and match you with the most suitable bridging loan options.
FCA-Regulated Lenders
We ensure your loan is secured with trusted, FCA-approved lenders for peace of mind.
Competitive Rates
Our brokers negotiate the best interest rates and terms to keep costs down.
Faster Approvals
We expedite the application process, helping you secure funding quickly.
Hassle-Free Process
From paperwork to lender communication, we manage everything for a seamless
How Do You Pay Back the Bridging Loan?
Repaying a bridging loan typically happens in a few ways. Most commonly, borrowers repay the loan in full at the end of the term. This means paying back the total amount borrowed along with any interest that has accrued.
Some lenders offer flexible options, allowing interest to roll up during the loan period. This means you don’t have to make monthly payments; instead, the interest is added to the loan balance and paid off at the end.
Many investors plan their exit strategy before taking out a bridging loan. This could involve selling the property for a profit or refinancing with a buy-to-let mortgage to secure longer-term financing.
It’s important to communicate with your lender throughout the process. They may provide guidance on repayment options and help ensure you meet your financial goals.
Below Market Value (BMV) Mortgages: A Smart Alternative to BMV Bridging Loan
BMV mortgages are a great option for financing properties under market value. These loans cater to buyers seeking discounted homes, making ownership or investment easier. Buying a property below market value can be thrilling. It allows investment in homes needing repairs or sold quickly. With a BMV mortgage, you can get funds specifically for these properties. This support helps you get a good deal. It ensures you have the needed financial backing.
What Does Open Market Value Property Finance Mean?
Open Market Value (OMV) property finance refers to the financing approach that uses the estimated market value of a property rather than its purchase price to determine how much money can be borrowed. This value is assessed by a qualified surveyor and reflects what the property could sell for in a fair market transaction.
Using OMV allows borrowers to access higher loan amounts, as lenders may calculate the loan-to-value (LTV) ratio based on this figure. For example, if a property has an OMV of £250,000 but is purchased for £200,000, the lender may base the loan on the higher OMV. This strategy can significantly increase borrowing potential and enable investors to fund renovations or other expenses effectively.
What Are the Differences Between Open Market Value and Below Market Value Property Finance?
|
FEATURE |
OPEN MARKET VALUE (OMV) |
BELOW MARKET VALUE (BMV) |
|
Definition |
Based on the estimated market value of a property. |
Based on properties sold below their market value. |
|
Loan Calculation |
Lenders use the lower of the purchase price or market value. |
Lenders use the higher open market value for calculations. |
|
Loan-to-Value (LTV) |
Typically lower due to using purchase price for calculations. |
Higher LTV ratios can be achieved, often up to 75% or more. |
|
Investor Benefits |
Suitable for standard purchases without significant discounts. |
Ideal for investors looking to capitalize on discounted properties. |
|
Property Types |
Generally used for traditional residential purchases. |
Often used for distressed properties needing quick sales. |
|
Exit Strategy |
Usually involves long-term financing or resale at market value. |
Commonly involves quick resale or refinancing after improvements. |
GET STARTED TODAY!
Contact us today to unlock the potential of your property investments with the right bridging loan solution. Your successful property venture begins here.
