A Step on the Property Ladder

As first time buyers Mr. & Mrs. R. approached BFS in September 2015 to purchase a property for refurbishment at Auction in Oldham to help them take their first steps onto the property ladder.

The property identified was a three bedroom semi-detached house that was being sold as part of a probate sale with a guide price of £100k. BFS instructed an independent RICS survey on behalf of the borrowers prior to auction and the property valued in its current condition at £125k. BFS lend 70% of a property value rather than purchase price, therefore, a gross loan offer was offered for £87,500. Mr. & Mrs. R. were successful at auction securing the property at £103k. 

The loan provided was therefore 85% of purchase price with the clients having to find a considerably reduced deposit of approximately only 15% or £15,500. The couple were able to borrow this money from a combination of parents and Grandparents releasing pension funds.

BFS also agreed to deduct six months interest from the gross loan advance meaning that Mr. & Mrs. R did not have to make any interest payments for the first six months of their loan and were able to maximise their available funds into the refurbishment of property. 

During the next six months, the couple set about refurbishing the property, carrying out much of the minor works themselves. After three months a re-inspection of the property was carried out and a further loan advance was arranged as the property had increased in value further to some of the works being completed. The total cost of works was £10k with £5k being provided by the customers and £5k provided by BFS.

Upon completion of the works, a 25 year mortgage was applied for and the property was valued at £145k. Because this was a standard residential mortgage application on a fully modernised property they are able to secure a 90% mortgage of £130,500. From the mortgage they were able to pay back BFS the £92,500, their family members c. £15,500, recover the £5k they had spent on the refurbishment works and be left with an excess of £17,500, which they were either able to drawdown upon or leave as equity giving them a total equity in the property of some £32k.

Mr. & Mrs R. are now on the property ladder with £32k equity in a fully modernised property and have paid back all family members within six months.


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