Using Bridging for BMV purchases
BMV stands for below market value and is becoming a popular acronym for the process of buying a property at a typical discount of 20%-30% discount to its market value.
Before the credit crunch property investors would buy property below market value with a bridging loan and then refinance within a short period with a buy to let mortgage product without putting any deposit into the transaction.
This method financing as disappeared because the majority of long term lenders require you to hold the property for 6 months before refinancing. in addition the majority of bridging finance lenders will not finance 100% of the valuation without some cash contribution going in from the customer.
However in certain cases it can still be done but requires expert knowledge of which bridging lenders will finance the valuation of the property irrespective of the purchase price and most importantly, which lender will refinance the property to exit the bridging loan.
Example of a 100% finance BMV Bridging loan
A customer has an opportunity to buy a property for £175,000 for a completion within 10 days. They have it valued at £250,000. The Bridging lender will finance up to 75% of its valuation subject to a max 100% of its purchase.
75% of the valuation is £187,500, so the customer can finance the full £175,000 they require to complete the purchase.