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Paying High Interest Rate To Control Valuation

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Is it worth paying a higher interest rate to have more control over your valuation?

This is a subject that I discuss frequently with clients, so I thought it deserved a spot on the grid!

When clients call me to discuss what products are available for a project, the conversation about valuation methodology is becoming more important – and as you should know by now we really aren’t a rate-driven broker so there are always options to cover this as well as the route of least resistance.

So what can you achieve from your valuation when you aren’t focused on the cheapest option?

The aggregate value for blocks of flats up to 10 units – can add 10% to your value

A commercial or hybrid valuation on small HMOs (5-6 bedrooms). We have seen again and again recently how this means you can pull so much more out of your property.

How does it work?

  • We have access to the lender’s panel of surveyors and are able to give you a few quotes for you to decide who to use.
  • Due to our experience, we are able to let you know who we have used before and our positive and negative experiences with them!
  • We can ask for a quote from a valuer you have used previously if they are on the panel.
  • You are able to call the surveyors to gauge their methodology for your property.

How does that compare to a standard lender?

  • High street and fewer specialist lenders won’t have any of these options.
  • You pay less for your valuation, in some instances, they are free (with an admin fee).
  • But you aren’t given any options, and it’s likely that Allied or Connells will carry out the valuation.
  • They are great surveyors for standard residential properties, but anything outside of that needs a more specialist company to look at their true value.

Benefits of Bridging to Purchase Your Next Deal

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What are the benefits of using bridging over cash to purchase your next deal?

The Valuation

Your bridging lender will instruct a valuation and the surveyor will have your schedule of work, so you have a professional opinion on your now and after-works figures.

The surveyor will also pick up if there’s anything that the lender doesn’t like – for example its location, neighbors, or nearby commercial units.

 

The Legal Process

Although you will need your own solicitor to purchase property cash, they are not the lender’s solicitor and therefore won’t be able to get their take on any unusual legal issues. It is much more tricky to resolve lease issues for example after you have purchased a property. Using a bridge means we have access to a lender’s solicitor and know that the property is mortgageable.

 

It Frees Up Your Money

You can look to take on multiple projects if all your money isn’t tied up on one, which it may be if you are funding the deposit and refurbishment yourself.

You also have the option of borrowing your refurbishment costs, which on bigger projects can mean you are putting in as little as 30% of the purchase price and the purchase costs.

 

It Doesn’t Cost Twice As Much

The preconception is that bridging is expensive, but there are lots of ways we can reduce the overall cost if you need a bridge and an exit with the same lender.

Lenders can reduce arrangement fees, valuation costs, and legal fees if you use them for both, and Baya will only charge an admin fee for the refinance if we have arranged the bridge.