BMV (Below Market Value)

What Does BMV Mean In Property Investment?

BMV stands for Below Market Value.

It describes a property bought for less than its assessed open market value. The term is used constantly in property investing circles, and rather loosely — which is where problems with lenders begin.

What Counts As Genuinely BMV?

Negotiating a discount off an asking price is not the same as buying below market value. Asking prices are aspirations. A RICS surveyor may well conclude that the price you negotiated is the open market value — because the market is what someone will actually pay, not what the vendor hoped for.

Genuine BMV purchases usually involve a reason the vendor accepted less than the property would achieve on the open market with normal marketing:

  • Auction purchase
  • Repossession
  • Distressed sale
  • Cash sale or fast completion required
  • Probate
  • Large portfolio or bulk sale
  • Off-market sale

The common thread is speed or certainty being worth more to the vendor than price. That is what creates a real discount, and it is what a valuer will accept as an explanation.

The Six Month Rule

This is the single most important thing to understand about financing a BMV purchase.

Most lenders will only lend against the purchase price, not the valuation, for the first six months of ownership. So if you buy at £120,000 a property worth £160,000, a 75% LTV mortgage in month one gives you £90,000 — not the £120,000 that 75% of the true value would suggest.

The discount is real, but you cannot immediately borrow against it. Practical routes around that:

  • Wait out the six months, then refinance against the valuation
  • Use a lender that permits day one refinance at value — a small number will, where the discount is genuinely evidenced
  • Use a bridging loan to buy, add value through works, then refinance onto a term facility against the improved value

The third route is the standard BRRRR approach — see BRRRR. Refurbishment work generally gives a valuer a much clearer basis for uplift than a claimed discount does.

Evidence The Discount

If you want a lender to recognise a BMV purchase, document why the vendor sold cheaply: auction particulars, probate correspondence, marketing history, or evidence of the condition at purchase. An unevidenced claim that a property is worth more than you paid rarely survives a surveyor’s report.

Related: CMV, OMV, 180 day value.

Read more about buy to let mortgages, bridging finance, or speak to us about a purchase.

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