Boosting Your Property Profits

How to Maximise the Loan to Value You Receive on Your Next Refurb

Going through a refinance can feel like betting on the lottery. You sit there with your fingers crossed hoping that the right number is going to get called out. Whereas in the lottery you might be waiting for number 88, in your refinance, you might be hoping a lender will offer a 75% loan to value (LTV).

But what if we told you that you didn’t need to wish? That there are some tried and tested formulas that will increase the loan to value of your next property project?

In this article, we’re going to show you how to increase the value of your refinance so that you can pull more money out of a deal and grow your property portfolio quicker.

How to Add That Extra Value

The key thing to remember before refurbishing a property is that it needs to look different after the work has been completed. Too often, investors just add a new carpet, paint the walls, and put in a low-cost bathtub.

Although there is nothing wrong with this if you’re on a budget, it won’t give you the best offer from a lender. If the valuer doesn’t feel like they are walking into a brand-new property, then this will be reflected in their report.

Kitchens and bathrooms add the most value, so focus on these areas. Spend a little more on them if you must, or just design them in a way that makes them look impressive. Your end goal is to blow the valuer away, and these are the two areas they’ll pay the most attention to. Save some money by cutting back on non-essential items, like taps and faucets.

With the rising topic of sustainability, banks are rewarding people who are conscious of their home’s impact on the planet. Be eco-friendly in your refurbs where possible. Air source heat pumps, solar panels and other sustainable solutions go a long way in increasing a lender’s offer.

Finally, look for planning gain. If you have the budget, then convert the loft or cellar. If it’s possible, then extend the property. However, if you don’t have the capital for this, then just achieve the planning and then don’t build it out. Planning permission alone adds value to a home.

Use a Bridging Loan

Bridging loans allow you to purchase a property with a higher value than you would be able to attain with a traditional mortgage. By using a bridging loan, you can increase your equity in the property, which will decrease your LTV ratio. This is particularly useful if you’re trying to purchase larger projects, like commercial conversions.

Increase Rental Income

Increasing your rental income can also increase your LTV ratio. The method behind this is similar to what we covered in the section above. The goal is to create somewhere that is a desirable place to live. If you want rental income that is higher than similar properties in your area, then you’re going to have to refurbish your property to a higher standard.

Location also plays a role in rental values. If you find a run-down wreck that has easy access to a school and transport links, then you’ll be able to demand a higher rental income once it has been refurbished compared to a rural home that isn’t close to anything. The value you have added through refurbishment combined with the location of the property will push both your rental income and your LTV ratio up.

Also, try to look for properties that are desirable to more than one type of tenant. I.e., if it’s suitable for families, could it also be suitable for young professionals or couples?

Shop Around

Shopping for finance is just like shopping for any product. You want to get multiple quotes from multiple providers so that you can pick one that is best for you. Lenders are businesses, and the things that are happening internally in a business might affect what it can offer. Just because a high street bank can only offer you 65%, it doesn’t mean that a different lender won’t offer 85%.

However, shopping around is a time-consuming task, and mortgage applications aren’t the most fun forms to fill out. The quickest way to get multiple quotes is to speak with a whole of market broker who can scan the market on your behalf. Then, they can present you with multiple offers so you can pick the one that is best for you.

As an award-winning, five-star rated mortgage provider, we know how to help investors maximise the returns they get from their projects. The best part is, we’ll get you an offer in principle on mortgages and bridging finance for zero cost. Just book a free consultation with a member of our friendly team by clicking here, and watch us push your LTV ratio through the roof!