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I currently have a property (main residence) with approx £200K of equity. I would like to start a property portfolio and looking to start easy with a BTL.
My initial plan was to refinance my residential property to take out some equity and use that as a deposit, start a Ltd company and buy a BTL.However, my current mortgage with an Offset and the bank is a closed bank so I cannot refinance. I do not want to remortgage, so is there any other options for me to pull out some equity.
I'm new to refinancing so some ideas would be most welcome.
Hi Gavin and welcome to the tribe.There are four main ways to release equity and I have listed them with the simplest and least expensive first. As you go down the list, it becomes more complicated and therefore more expensive.1. Ask your existing lender for what is known as a "further advance" or take a draw down from your Offset mortgage. This can be done direct with your bank, but will obviously depend on affordability.2. Remortgage away from your current lender to a higher LTV with another bank, again dependent on affordability, although you may secure a better rate in the process so the monthly payment may not be necessarily higher.3. Take out a second charge loan from a different lender. These are becoming more popular, but should be used with caution.4. Bridge against the £200K equity in your home. You would need a vehicle/strategy to repay the bridge and this is short term lending, so higher rates.The team at Property Tribes Financial Services on 01206 654444 can assist you and explain all four options and what you can do with your personal financial situation.Hope that helps?
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**
If your current bank isn't lending anymore then a further advance is not possible but maybe a second charge / secured loan is possible?
We can advise on all of these options
Call us anytime for quotes and advice.
EDITED - Just seen that Vanessa also posted at the same time. The further advance option may not be possible, but worth asking for.
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By the sounds of it you may be with Intelligent Finance perhaps for your offset and it is a shame that they (and others of course) are no longer lending.
Bottom line is you can look to get a second charge mortgage (basically another loan secured on your residential property with another lender who puts a second charge behind the first charge that your current lender has. That is one option.
Another option is to actually remortgage the entire mortgage to another lender. There may be several reasons why you would and would not want to do that based on the current deal you have, whether it is on interest only, your current situation etc.
There are other offset providers out there (e.g. Scottish Widows) with great products and so it is worth considering as second charge loans are a bit more expensive in rate and fees. Another reason is that you could (potentially) remortgage to another offset, borrow as much as you can on day one, pay back what you are not using on day two so that you create as big a slush fund as you can ready to use.
I hope this helps,
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You are spot on and thank you for your interesting ideas.
Are offset mortgages a good idea still?
An off-set mortgage appeals to me because I can build up funds to re-invest into the next property but whilst doing so, I am reducing the interest I am currently paying.
Offset mortgages have always been a terrific idea – especially for those with spare cash lump sum savings or regular savings – doubly so for those on higher rate tax.
I won’t go into the tax advantages but from your perspective you could raise as much as you can on an offset basis on ‘day one’ and then pay back everything you are not immediately using into the linked savings account on ‘day two’. That will create a kind of slush fund that you can draw upon at any time and it is on residential rates not BTL – so usually cheaper. When you aren’t using the money put it back in and save the interest.
You can do a 5yr fixed rate (if suitable) and not worry about it for half a decade. There may be some tax benefits (although quite limited) with regards to the interest on the money you use for BTL funding but they will be limited and you should get a property tax specialist/accountant to advise you on that aspect.
One word of caution, you should consider using a broker to advise on the offset facilities as there are different types of offset and you need to make sure you are going for one that allows you to do exactly what you want to do.
I hope that helps,