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Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com
One of the major benefits of owning unencumbered property now is that you will not be affected by Section 24!See - Opinion: Cash buyers to become dominant force
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
You might still be affected through other encumbered properties
My sister with just the one unencumbered property won't be affected.
I with three unencumbered (plus my home) and four encumbered properties (plus one in a company) would eventually be affected If I didn't make changes in time.
Ultimately you have to look at all your properties as a portfolio.
The way I think of it is:
1. What are my properties worth in total?
2. What is the level of leverage I am comfortable with?
3. Then find the least number of properties that I can mortgage to get that leverage.
In addition to the advantages that have also been mentioned, its easier to manage a few highly levered properties than lots of lowly levered ones (e.g. with respect to refinancing costs, paperwork etc..) - assuming interest rates are the same of course. Similarly as people pay down mortgages over the next few years, it makes to focus on one property at a time and pay it off completely rather than paying a little bit off lots of them (assuming all remaining encumbered properties are refinanceable when the time comes).
Just adding our video on this topic for reference:
One can very easily create one's own borrow back facility.
All you have to do is obtain an offset mortgage
Then borrow as much as you can.
Then put those borrowings into the offset mortgage savings account.
Therefore no interest.
But it leaves that unencumbered property debt free, but with the ability for the LL to instantly borrow without any further referral to a lender
This giant overdraft facility could be available for the following 35 years.
It may never be required, but it could be!
It is effectively a mortgage facility which works on a just in time basis. Take savings out of the offset savings account and debt interest is paid.
Return funds to the offset mortgage savings account and debt interest stops!
There is no other facility more perfect than a giant overdraft called an offset mortgage.
Just perfect for a LL even for a S24 one!!?
Put every single penny you can into the offset savings account
An offset mortgage is the perfect way to utilise the equity in an unencumbered property.
If I had 5 unencumbered properties I would remortgage them ALL for as long term as possible on offset mortgages.
It maybe that the funds are never used, but nice to know they are there if ever needed without ever being required to jump through hoops ever again and no churn fees ever again!
Interesting thought Paul. Are there many offset mortgages available for BTL or is this just something we could do with our own home?
There are more lenders that now offer offset resi and BTL offset mortgages.
I think about 5 lenders offer offset products though they have more stringent requirements than normal mortgages.
Though if a property is unencumbered then that isn't that important
Even if you can only remortgage to 5O% of value that still builds up your fighting fund.. Though in the present climate investing further in BTL is something I wouldn't be doing .
But I would create the borrowing fund ready in 4 years time for all the S24 and EPC non compliant LL desperate to offload their dud properties.
BMV buying will really come to the fore then!
interesting idea - would be good to get a feel of what sort of offers are currently available on the market.