100% Finance – Example

If you raise a loan to fund the 30% for your deposit, the developer will make the payments for this amount on your behalf. See the example below:

30% deposit required (less £1000 ($2000) reservation fee) within 45 days of reservation. Should you choose to borrow the 30% deposit, the developer will pay the loan repayments, including interest, for the 30% deposit until completion of the specific unit you have reserved. These payments will then be added to the purchase price upon completion.

Example (Sterling): Property price £200,000. £1000 reservation fee paid. The deposit = £200,000 x 30% = £60,000 – £1000 (reservation fee) = £59,000. Interest on £59,000 @ 6% p.a. = £295 per month, paid for 24 months by the developer = £7,080 added to the purchase price upon completion.

Example (US Dollar): Property price $370,000. $2000 reservation fee paid. The deposit = $370,000 x 30% = $111,000 – $2000 (reservation fee) = $109,000. Interest on $109,000 @ 6% p.a. = $545 per month, paid for 24 months by the developer = $13,080 added to the purchase price upon completion.

Due to the significantly discounted off-plan contract price and the capital appreciation during the construction phase, it is anticipated that the £200,000 ($370,000) purchase price will have grown to a property value at completion of circa £325,000 ($601,250)

At this point a 70% developer loan ( *Subject to finance ) will be required and therefore you will be able to borrow up to £227,500 ($420,875). This is clearly ample to pay for the £199,000 ($368,000) (purchase price less £1000 ($2000) reservation fee) that you owe as well as the accrued interest of £7,080 ($13,080) – from the above example.

Assuming you borrowed the maximum loan to value mortgage, available from the example above, you would borrow £227,500 ($420,875) on which the annual interest payment would be £18,200 ($33,670) based on a rate of 8%. The rental guarantee of 10% of your purchase price of £200,000 ($370,000) will generate you an income of £20,000 ($37,000) each year, should cover your mortgage payments. If you wish you could retain the £59,000 ($109,150) loan you took out for the deposit, pay the interest yourself each month, from completion onwards, and use the money to invest in a further investment property purchase.

*Subject to status. Terms & conditions apply.

Obtenir are not authorised and regulated by the Financial Services Authority. Obtenir do not offer Financial advice.

Obtenir do not offer advice on SIPPs direct. We will refer all interested clients to an FSA authorised firm for this puropose.