Case Study – 100% funding – Full transparency

by Howard Reuben CeMap CeRER

12:03 PM, 5th October 2013
About 7 years ago

Case Study – 100% funding – Full transparency

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Case Study – 100% funding – Full transparency

Case Study - No Money Down - Full transparency

We’ve all heard of those ‘no money down’ schemes (mortgage fraud scams) where a ‘property sourcer’ has negotiated a discount and the buyer and his friendly mortgage salesman gets a mortgage based on the normal market value.  Many were very active in this market, some still are, however ……

….. what is not so widely reported – mainly because the shrewd investors who use the following strategy don’t normally shout about it – is the ‘cross charging’ 100% capital raising process which allows for the full purchase price, refurbishment costs and subsequent buy to let remortgage (if keeping the property) all to be arranged in a transparent and legal process, often all with the same lender.

How do I know about this?

Because we’re doing it, and I have a case study to share with you …

Case Study for a 1st and 2nd Charge combined arrangement

Our client required a deal they couldn’t get via their usual high street lender. He was looking to buy a property, renovate and then take out a BTL based on its new and improved value.

Crucially, and the main issue that nearly caused him to lose this opportunity, is that he was also limited in the cash required to secure this deal, although he had a good level of equity in his main residence.

Our client ideally needed to borrow 100% of the purchase price and 100% of the renovation costs using the equity in his home as additional security. Once renovated he wanted a quick solution in changing the bridging loan into a BTL.

  • Our client owned his residential property with a value of £600k
  • Mortgage outstanding £300k with Halifax
  • Purchase price of the property currently worth £150k
  • Refurbish costs £40,000 – Renovation including new kitchen and bathroom
  • Total borrowing required £190k

The solution?

First, to borrow 75% of the new purchase which gave him £112.5k

Second, the shortfall of £37.5k towards the purchase and the additional £40k needed for the renovation works (£77,500 in total) was raised by adding in the additional security via a 2nd charge on the main residence.

He was actually offered a 2nd charge bridge on his residential property up to 70% LTV, which meant he could, if he wanted to, raise up to £120k from this property (70% = £420k, his existing mortgage is £300k), far more than enough to make up the required difference (£77,500) to cover the full 100% of the purchase and 100% of the renovation costs.

The valuer was booked to attend the property within 72 hours.  In the meantime our client was quick in supplying the shopping list of requirements required and forunately instructed a solicitor who understood the speed required for a bridging loan. The deal was completed within a few weeks enabling our client to ‘do up’ his new property, increasing the value to £300k.

Three months later our client was able to change the bridging loan product to the lenders BTL product, releasing 75% of its new improved value. This released £225,000, enough to pay off the bridging loan and put some money back into his cash flow.

This is the intelligent, new improved, ‘no money down’ style of investing and refurbishing which is helping many savvy investors to add property to their portfolio without laying out any of their own liquid cash.  Instead, they are letting their own existing bricks and mortar do that for them.

We are now very closely associated with a leading and award winning bridging loan / short term lending packager who specialise in these cases.

We have a very simple enquiry / AIP process and as highlighted above, cases can be processed very quickly indeed.  In this case, after 12 weeks of work, our client ended up with another property in his portfolio and also approximately £20k in cash (after fees etc) as well.

Could this be of interest to you?

Contact Howard Reuben

Mortgages, Commercial and Bridging Finance, Life Insurance, Wills, Trusts and LPA's
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1:53 AM, 6th October 2013
About 7 years ago

I think i would have to agree with Vanessa on some of her points here, as handy as this strategy is the main thing for me is this is not 100% funding and shouldnt be mentioned in the same breath as no money down. This guy has borrowed £112,500 against the property he is buying, and then borrowed £77,500 in way of a 2nd charge against his house so in theory he has borrowed 100% BUT £77,500 of that is HIS money taken out of HIS house so technically he has put in £77,500 of his own money. If it was 100% financing he would put in none of his own money weather it be cash or 2nd charge on his house.

Neil Patterson

7:23 AM, 6th October 2013
About 7 years ago

Reply to the comment left by "Rob walsh" at "06/10/2013 - 01:53":

I agree with you Rob that it is not 100% finance on the development property in question.

The real story is that if you have equity in other properties you can now use 2nd charge commercial finance which I know has been difficult to find from reasonable lenders in the last few years.

When Howard is back at his computer as I am sure he would like a weekend with Mrs H 🙂
I would love to know what the criteria and LTV to qualify is and what sort of costs are involved.

That way readers can make their own minds up if they might qualify and if the cost make sense in their individual business plans.

No point having a strong opinion until we know this sort of detail.

Neil Patterson

7:32 AM, 6th October 2013
About 7 years ago

Reply to the comment left by "Neil Patterson" at "06/10/2013 - 07:23":

PS Mezzanine finance is another form of funding at a cost obviously that can be used to borrow more than the standard max 70% finance on a development project.

Mark Alexander

8:18 AM, 6th October 2013
About 7 years ago

Adam, this sounds like its based on a shared appreciation model , I've not seen those types of mortgages since Bank of Scotland stopped doing them in the early 90's. I am on the right track in terms of guessing how this might work and can you disclose the lender(s)

Vanessa Warwick

8:54 AM, 6th October 2013
About 7 years ago


I am a little perplexed at your comments to be honest.

I did not suggest for one single moment that Howard, you, or your brother were involved in courses or were involved in anything dodgy!

If you just put your affront at my questions to one side of a moment, you will see that I am actually trying to distance this post from the NMD schemes going around and I thank Rob for understanding that and developing that idea.

As for my "niche" .... my niche is to ask questions to bring clarification to matters.

Why that should cause offence over a legitimate scheme, I struggle to understand....

My understanding was that, like Property Tribes, Property118 is about best practice, so, if that is the case, this site is just as capable as exposing scams ... which it should.

However, this is clearly NOT a scam, I never implied it was, and its a shame that points scoring is now being used just because I asked for clarification.

Mark Alexander

9:17 AM, 6th October 2013
About 7 years ago

Thank you for the clarification Vanessa.

I was a bit miffed when you suggested the post should be labelled as an advertorial because it isn't one.

Your second post seemed to imply that there was a connection between the article and wealth creation gurus. I couldn't understand why you made that connection as there obviously isn't one.

Your third post cleared things up a bit so thanks for that.

With regards to exposing the scams of wealth creation gurus and rogue agents I do think the readers of Property Tribes are very experienced. We don't get involved as we have a no name and shame policy for private businesses here. If anybody has doubts about a person or small business I always refer them to Property Tribes or All Agents.

Neil Patterson

9:26 AM, 6th October 2013
About 7 years ago

Poor old Howard Hijacked.

I would keep this to products and wait till we get a few more details.

I am sure he is enjoying his weekend, but if I was him I am not sure I would relish commenting.

Vanessa Warwick

9:28 AM, 6th October 2013
About 7 years ago


I cannot help connections that you made in your own mind, that I never intended.

My second post was to seek clarity to show that there was no connection between this post and the rogue NMD schemes.

As for scams etc, Property Tribes has a zero tolerance to defamatory comments, just like this site.

However, we promote the discussion of METHOD, so that people can understand due diligence.

I am surprised you say that is not on the remit of Property118 and I confess to being a bit confused, because by posting strategies, people will ask questions, which is in fact discussing method.

Companies are only allowed to be named and shamed on PT if we are supplied with documentary evidence to support such claims. Then it becomes fact, not hearsay, and its of benefit to the whole community.

I am glad I have had the chance to explain this as its important that PT is not labelled as a place where scams are discussed.

It's a place where METHOD is discussed and scams - supported by documentary evidence - are brought to the attention of the community to warn them not to get involved.

Property Tribes was set up to discuss best practice and help people avoid the property snakes and find the property ladders to accelerate their success. It's not just me that questions the ner-do-wells ... a whole new generation of newbies are learning the questions to ask, supported by other experienced investors ... as you say, sharing is caring, and that comes in many flavours ... which is healthy for all.

Mark Alexander

9:35 AM, 6th October 2013
About 7 years ago

I may have missed it, what is your question Vanessa?

Mark Alexander

10:41 AM, 6th October 2013
About 7 years ago

Back to the main thread.

The bungalow project my brother is currently working on was not a property which was purchased below market value. It was advertised on the open market by a reputable Estate Agent for £170,000. There was interest from three developers and the deal went to sealed bids. My brothers was the highest bid at £13,000 above the asking price. He recognised the development opportunity to turn the worst house in a good street with the best view of the street overlooking Wootton Park into one of the nicer properties in the street. It's not always about how much you pay, it's often about spotting opportunities to add value with most buyers can't recognise.

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