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  • Buy-to-Let

    Equity Release in current environment

    Dear Tribers

    My friend has a BTL with a LTV of 45%, prop value is 340k for which is IO mortgage is 158K.

    He is only paying 300 per month on rental income of 1100 and has been offered an advance of 60k to increase his funds for another purchase.

    The increased mortgage payment would be 400 (5 yr fixed) but he is afraid of future implications with interest rate rises etc, last but not least he is not a HRT payer

    Should he take the money?
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    Does he have any other more expensive debt like credit cards or car loans?  If so, use the equity release to pay these off first is my advice.

    Fixing for 5 years is a good idea and if you can access £60K for £50.00 more per month, it seems a bit of a no-brainer to me, but he shouldn't necessarily use that money to buy more property.  Create a warchest, and pay off expensive debt should be a priority imho.

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    Hi Vanessa
    He has no other debt Wink at the moment and wonders what else he could do with the money for 100 per month
    Or his other option is to use this cash to pay down the mortgage on his main house? 
    Regards
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    Does not make sense to me .Why would anyone plan to borrow money just because they can and then try and think of a purpose for it.

    Chances are the BTL mortgage rate is higher than the residential rate so no point in trying to reduce the mortgage on their on home

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    Given he has no debt it is a no-brainer that he should take the money to get more houses. In Yorkshire he could get at least 2 houses (3 at a push) with that kind of money. Roughly speaking he’d add another £600 plus per month to his monthly income and benefit from capital appreciation on another 2 houses.

    What’s not to like?
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    Dear Tribers

    Thanks for the replies

    I was offered a 50k advance on my residential mortgage in 2011 which I did not take, it would have only cost £1-150 per month IO.

    I then saw a 2 bed bungalow near my address for £250k which I could not buy as the bank refused to give me the advance as the offer was no longer available, that same property sold for over £400k in 2018, I rue this opportunity every time I drive by.....

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