Equity from property

stockmarket-diva

Can someone tell me about raising equity from my existing property in order to buy another property to rent out etc.

I am slightly confused about this, I have about £250k in equity in my own property and would like to use that towards buying more property. I read about people who take equity from their homes to do this but not sure how to go about it and what it entails ie do I have to prove income for using that equity etc.

I look forward to your advice.

Ian_W

Simple answer is they generally don't "take equity from their homes" they use their home's increased value to borrow the money they want on a mortgage or remortgage. To do this your earnings would have to be sufficient for the repayments. Have a read of Martin's remortgage article on the Mortgages & Homes section of the site.
An alternative [or you could combine the two] is to borrow on a BTL basis against the property you wish to buy. The advantage is that affordability is less to do with your earnings and more related to the rental your property is likely to realise.
The only other thing I would say is buy to let is a business - so you need to make sure the figures add up before you go down that road. After the mortgage, fees, repairs etc will the rent give you a decent return? If you're looking at it long term prices can go down as well as up and property has high opportunity costs for buying and selling as well as the prospect of CGT when you dispose of it.

Debt_Free_Chick

Agreed - there is no way of taking equity from your home, unless you sell it and buy a replacement property at a lower price.

"Taking equity" usually means that you borrow some/all of the theoretical increase in value. It's theoretical as the current value is based on what you might get if you sell now. And that value could fall ... with the result that you may end up with a mortgage which is greater than the value!

MortgageMamma

Mr_helpful wrote: »

This is dead easy. I have bought a few buy this method. You can raise capital on your existing house, assuming you are going to stay there it will be a residential mortgage. You will need income but it may be self certified or fast track with some lenders up to 75% of the houses value (more with a few lenders). This can then be used for purchasing Buy to Lets. Most people only use that money for deposits as they put a buy to let mortgage in place on the new house because the BTL mortgage has tax advantages. As a general rule BTL mortgages go to 85% and are underwritten by the lender on the expected rental income. This gives you 85% BTL mortgage plus 15% deposit from your house = 100% of the new property with no money down from your pocket other than valuation and legal fees.
You need to contact a no fees independent broker who specialises in Buy to Let like me there are several on this forum.

And the increased mortgage payments on your residential property

Ian_W

Mr_helpful wrote: »

You need to contact a no fees independent broker who specialises in Buy to Let like me there are several on this forum.

Tut, tut ... touting for business on the forum is against the rules you know. Not for the first time either if memory serves me right!

Mr_helpful wrote:

because the BTL mortgage has tax advantages.

And what would those be? AFAIK it's the purpose of the loan, not which property it's secured against, that allows you to claim the interest as tax deductible from your income tax.

MortgageMamma

That can be read differently dependent upon your viewpoint, there is nothing wrong in pointing out that one specialises in a specific mortgage area such as BTL, Self Cert, RTB etc, if you are looking for touting then you would read it like that, but I'm sure the majority on here would just see it for what it is, a broker specifying his specialist area.

The majority of my work is adverse credit remortgages for debt consolidation, is that touting?

Ian_W

So you wouldn't consider it touting if someone posted an adverse credit mortgage query and your final line was:
"You should find a broker like me who specialises in adverse credit" ?

Or if someone was asking about investments you'd say it's OK for an IFA like dunstonh to reply - "you should consult a specialist investment IFA like me" ?

Why should I be looking for touting - I don't think you can find a post of mine that is particularly anti-adviser on any of the forums. Sure things can be read in different ways, that's what keeps the courts busy, but I disagree that only those looking for touting would see it that way - in fact it could only be more obvious if it said, "contact me and I'll sort it out"!

Mr_helpful

Ian_W wrote: »

Tut, tut ... touting for business on the forum is against the rules you know. Not for the first time either if memory serves me right!

And what would those be? AFAIK it's the purpose of the loan, not which property it's secured against, that allows you to claim the interest as tax deductible from your income tax.

Oh dear missed a comma before the "like me there are plenty of brokers on this forum. "

As for the second part of the post I was trying to keepthings simple for the OP. If you know so much about the subject why dont you try and be constructive and help the OP. How many BTL's do you have?

MortgageMamma

I think perhaps Mr Helpful was making the forum user/s aware that there are brokers who have specialisms, his is buy to let, others specialise in adverse or commerical. I honestly dont think he means it liek that

did you not see the way he reacted (together with other brokers) to wardlaw when he came on and persistently flouted the rules even though I advised him what they were and directed him towards the thread several times? I don't see how he would try and put off another broker for touting whilst touting himself?

I happen to know Mr Helpful personally, he's been in the industry for 20 odd years, is a part of the same network as me and has a well established practice in London. He honestly just doesnt need to tout. I am however concerned about the amount of new brokers coming on here blatantly flouting the rules no matter how many times its pointed out to them and getting away with it.

I know the correct procedure is to report it to abuse, but the abuse team are massively overstretched and struggle to do anything quickly, it takes quite a long time for them to respond sometimes due to the sheer volume of reports, so it is physically impossible to read the whole content of every single thread

Ian_W

Mr_helpful wrote: »

Oh dear missed a comma before the "like me there are plenty of brokers on this forum. "

Which is touting posters to use the brokers who post on here. My understanding of the code for brokers is that 3rd party, as well as touting your own business, is not allowed. If someone approaches you direct after one of your "helpful" posts - fair enough that's their decision but suggesting to posters they use brokers because they post here certainly isn't my understanding of MSE forums are all about.

Mr_helpful wrote: »

If you know so much about the subject why dont you try and be constructive and help the OP. How many BTL's do you have?

Please tell me what's unhelpful to the OP in post#2?
Not that it's any of your business but I don't have any BTL's currently but in what way is that relevant?

Mr_helpful

To say there are other brokers on the site with the right expertise is hardly touting for business is it. I also have several buy to let properties so I do have an idea of what its about. I have bought quite a few using no money down strategies which I doubt you will find in Martins guides. I am also a broker who doesnt charge fees so the OP is welcome to talk to me if they want to and equally if they dont I wont lose any sleep. Its a free world the OP can make their own mind up whether it looks like Im touting for business for myself or the other brokers. Why you think I would tout for other brokers though is beyond me.