As more Day 1 Remortgage products come onto the market, Buy to Let consultant Charlie Potter explains what they are, why they’re special and why they might be useful for you…
What is a “Day 1 Remortgage”?
A Day 1 Remortgage is a mortgage taken within the first 6 months of owning a property.
Why are they special?
Lenders stopped remortgaging property within the first 6-12 months of ownership, in response to the 2008 financial crash. Until then, there had been considerably less regulation which allowed 100% residential mortgages and 90% loan to value on buy to let mortgages. What started to happen, particularly with new builds, is that people would buy properties at a discounted rate with a minimum deposit, only to remortgage a few days into ownership at full market price. This meant they would get their deposit back and therefore have none of their own money tied up in the property, with all the risk laying with the lender.
During the crash, many of these types of properties went into negative equity, so when the lenders came to repossess to try and gain their money back, they inherited these losses instead. To protect themselves from this happening again, the 6 month mortgage rule was created.
Why might you require a Day 1 Remortgage?
This type of remortgage is now commonly used for properties that have been purchased and then undergone some refurbishment. A client will want to remortgage the property, using the open market value so that they can release funds to reimburse themselves for the cost of the refurbishment. Another common scenario is where a property has been inherited and the borrower needs to raise funds against the property to buy out other inheritors. We also see people wanting to remortgage within 6 months of ownership, where they have purchased a property using cash and want to release money back to themselves.
How can I get a Day 1 Remortgage?
If you think a Day 1 Remortgage may be a good move for you, please do not hesitate to contact me, Charlie Potter, at Mortgages for Business. As an independent, whole of market broker, we have access to a wide variety of lenders which are simply not available “on the high street”, including those which will offer these types of mortgages.
Alternatively, you can email me firstname.lastname@example.org