6 Month Resale on Property

[Onemcs]

So we're about to start our break into the property development world as a Ltd Company and someone mentioned the following:

You have to own the house for 6 months before you can resell it, or the mortgage companies won't mortgage it.

I've trawled through the WWW but struggling to find something that is applicable to property developers. We'll be buying cash, improving the property and then reselling.

Any of you had any issues?

[Sarnie]

Onemcs said:

So we're about to start our break into the property development world as a Ltd Company and someone mentioned the following:

You have to own the house for 6 months before you can resell it, or the mortgage companies won't mortgage it.

I've trawled through the WWW but struggling to find something that is applicable to property developers. We'll be buying cash, improving the property and then reselling.

Any of you had any issues?

The issue is nothing to do with you being a property developer. If you are reselling to cash buyers then there is no problem, but if you are selling to people who require mortgages then you are going to struggle as most lenders insist on 6 clear months of vendor ownership....

[Kudos]

Sarnie said:

The issue is nothing to do with you being a property developer. If you are reselling to cash buyers then there is no problem, but if you are selling to people who require mortgages then you are going to struggle as most lenders insist on 6 clear months of vendor ownership....

Is it not, as I understand it, some lenders won't let you (re)mortgage if within 6 months of previous mortgage? Rather than ownership?

[Sarnie]

Kudos said:

Is it not, as I understand it, some lenders won't let you (re)mortgage if within 6 months of previous mortgage? Rather than ownership?

Both sometimes.......

[Onemcs]

So if we were to increase a house value by say £75k in 16 weeks. We could be left with a house that only cash buyers would be able to buy until we've reached the 6th month?

Surely this must be a common thing in the property world?

[Eric Mc]

Surely such restrictions don't exist for bona fide property development businesses?

The property is being bought by the developer as "business stock for resale" - not as an investment property or a business fixed asset.

[Kudos]

Onemcs said:

So if we were to increase a house value by say £75k in 16 weeks. We could be left with a house that only cash buyers would be able to buy until we've reached the 6th month?

Surely this must be a common thing in the property world?

It is the main reason why people develop - to add value. If you turn around in 16 weeks, then you aren't a million miles away from the 6 month mark anyway, so perhaps not an issue?

I have in the past bought with mortgage and taken ownership of a property and resold in the same day. This was pre credit crunch days admittedly.

In my experience (relatively limited in this context as I normally develop to hold on to properties) the only issue I've seen is 2 x mortgages within 6 months - I've never seen the change of owner being a problem, but those with more experience will be able to confirm.

[uknick]

Why would a mortgage company care if the property was back on the market within 6 months?

Am I missing something obvious?

[westberks]

some lender BDMs promote the fact that they do back to back remortgage and purchases; most of the big lenders have a 6 or 12 month embargo. I recall that Nationwide and Aldermore are 2 that do.

all part of the post credit crunch world of "if we aren't sure or it's a bit of a grey area then we'll just ban it".

Mortgage Express and their day 1 remortgage of city centre 2 bed flats on dubious valuations has a lot to answer for. Other than that I'm not entirely sure what the problem is with the lenders as some don't have the limit imposed.

[Sarnie]

westberks said:

some lender BDMs promote the fact that they do back to back remortgage and purchases; most of the big lenders have a 6 or 12 month embargo. I recall that Nationwide and Aldermore are 2 that do.

all part of the post credit crunch world of "if we aren't sure or it's a bit of a grey area then we'll just ban it".

Mortgage Express and their day 1 remortgage of city centre 2 bed flats on dubious valuations has a lot to answer for. Other than that I'm not entirely sure what the problem is with the lenders as some don't have the limit imposed.

It's for many reasons including Fraud & Money Landering and preventing SARB schemes & Distress Sales...........

[98elise]

uknick said:

Why would a mortgage company care if the property was back on the market within 6 months?

Am I missing something obvious?

Its a bigger risk for them (why is the seller selling so quickly), and mortgages are not designed to be used for short term loans. There are other means of financing if you want to buy and flip in a short term.

[westberks]

98elise said:

uknick said:

Why would a mortgage company care if the property was back on the market within 6 months?

Am I missing something obvious?

Its a bigger risk for them (why is the seller selling so quickly), and mortgages are not designed to be used for short term loans. There are other means of financing if you want to buy and flip in a short term.

it actually affects the buyer as a genuine buyer could be declined a loan based on the short term ownership of the vendors, regardless of how they financed it or what work they've done. the irritating thing is there are no hard and fast rules as a few will still do them, but most have set a minimum period. if it was across the board with all lenders it would make more sense.

[FlashmanChop]

Sarnie said:

It's for many reasons including Fraud & Money Landering and preventing SARB schemes & Distress Sales...........

it just depends how clever your solicitors are. That was my only ever stumbling block, keeping ahead of the rules.

[Perec]

FlashmanChop said:

Sarnie said:

It's for many reasons including Fraud & Money Landering and preventing SARB schemes & Distress Sales...........

it just depends how clever your solicitors are. That was my only ever stumbling block, keeping ahead of the rules.

You say "was" have you stopped?

I used to make my living dealing in property, the six month rule was one of the reasons I stopped.

[FlashmanChop]

Perec said:

You say "was" have you stopped?

I used to make my living dealing in property, the six month rule was one of the reasons I stopped.

I didnt stop because of that. multiple reasons really.