How to take equity from house to fund BTL venture ?

mikeyw

I’m looking at ways to finance a second home as a BTL investment and it seems to me my best option will be to take some equity out of my current house.

The house is worth £350K with just under £300K of that as equity. How much will I be able to take out of the equity ?

Will it matter to the lender that it’s for a BTL venture as the money is obviously secured against my current home – just wondering if this will affect the rate I can get on an interest only mortgage?

Is there anymore to it that this – do I just raise the interest only mortgage & crack on and buy the property assuming the lenders will play ball.

One final thing does the current Stamp duty holiday apply to all purchases or just first time buyers ?

Many thanks,
Mike.

poppysarah

Invest with money you own not debt.

Have you researched BTL in depth for the area you're looking at and are familiar with housing law,landlords responsibilities etc.

mikeyw

Isn't the money in my house money i own ?

I need a long term investment as I can't see my pension been worth zip when I retire....is BTL really such a bad thing ?...i've been on the fence for years and time moves on...it's time to bite the bullet and stop thinking about it while the market recovers.

ManicMum

Hi Mikey

I would say go for it. I think you are doing the right thing. You can't put all your eggs in one basket. Give your lender a call about a further advance. If you have that much equity I wouldn't see them having a problem lending to you. Depends how much you want to borrow, how old you are (in terms of how many years you have to pay back the money you are borrowing). Your house may not be worth as much as you think - only downside - unless 350k is a true picture of its value. Also valuers are giving lower valuations though not sure if you need one of these for a further advance? I have a BTL myself but can not recall the procedure.

Unless you are stashed with cash, not many of us can afford to buy a BTL outright. Long term this should prove a good income for you.

good luck

mikeyw

I've about 6years left to pay off the the remaining £50K+

I'm only wanting to take out £130Kish so really the value of my house shouldn't make that much difference as i'm well below the equity value.

At this stage if i break even for a year or two i'll be happy in the hope that over the next 10years i might see a 50% increase in the value of the BTL property. I'm no spring chicken and am pretty familiar with doing up properties to a good standard although not actually done a BTL as yet.

With 2 children to possibly have to put through University in the future I really need some investment with potential.....was so tempted to buy Barclays sub £1 but all my savings were my security against redundancy and i simply could'nt take the risk although it was pretty riskless in hindsight

anselld

It is OK to take our further equity to fund BTL, but you need to keep track of what is funding BTL and what is your own mortgage. You can only offset interest against BTL income, not any capital repayment or any of your remaining £50k.

How much you can take depends on your valuation, obviously and the max Loan to Value (LTV) of the mortgage. Smaller LTV = cheaper mortgage. So at 60% LTV you could take out a further £160k assuming your £350k valuation ( 350*0.6-50).

The other advantage is you can still count it as a residential mortgage which is cheaper than BTL, even though you are then using the capital to buy another property.

I did the same - bought a BTL this Feb on 2% mortgage with First Direct (for the time being at least).

mikeyw

Smart move anselld - so the fact that you got the money at 2% proves they are happy to give you it at non BTL rates...did you tell them what the money was for ?

At those lending rates it must be a lot easier to cover your costs via the rents you charge.

Anyone able to answer the Question about Stamp duty holiday ?

poppysarah

mikeyw wrote: »

Isn't the money in my house money i own ?

.

Erm, you own the house. (Well all but 50k of it)
If you want the "cash" sell the house.

you can't have your cake and eat it.

anselld

mikeyw wrote: »

Smart move anselld - so the fact that you got the money at 2% proves they are happy to give you it at non BTL rates...did you tell them what the money was for ?

At those lending rates it must be a lot easier to cover your costs via the rents you charge.

Anyone able to answer the Question about Stamp duty holiday ?

Yes, I told them. Provided the money is secured on the main residence what you do with the proceeds is not their concern.

As far as who's money it is, you are borrowing against equity you own. It is your money to choose what you want to do with it.

I have no regrets, one daughter is using it now for Uni, two more might do similar, and it is one long term investment the chancellor will find difficult to get his hands on (unlike my pension!)

As far as I can see the Stamp Duty hol is all properties under £175k but it ends for completions after 31 Dec 09

silvercar

Stamp duty applies to all purchases. If by "holiday" you mean not paying SD on anything between 125k and 175k, that applies to all purchases completed by the year end.

mikeyw

poppysarah wrote: »

Erm, you own the house. (Well all but 50k of it)
If you want the "cash" sell the house.

you can't have your cake and eat it.

I don't make the rules up but as 1000's have found out it appears you can - seems silly not to benefit from the position i'm in