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Help with BTL equity release
flier
Posts: 88 Forumite
I'm not sure I have the correct terminology, but here goes with a quick run down of our situation.
Our BTL is worth at least £115k. Mortgage o/s is @£45k and we currently have an interest only mortage, which we've had for around 10 years.
We want to add an extension (@£45k)to the property we live in and thought the best way to do this would be to sell the BTL, but a friend was chatting to me about it yesterday and reckoned we'd be mad to give up the rental income on our BTL, which I do tend to agree with. Our interest payments are currently £95 per month, rental income £550.
Having no knowledge of the current mortgage market, I wondered if someone may be able to tell me how easy it would be to add to our mortgage on our to fund the extension to our own house. I currently pay no additional endowment, and seem to remember this now being a requirement for all interest only mortgages. Is this true?
Aargh, I'm clueless!
Our BTL is worth at least £115k. Mortgage o/s is @£45k and we currently have an interest only mortage, which we've had for around 10 years.
We want to add an extension (@£45k)to the property we live in and thought the best way to do this would be to sell the BTL, but a friend was chatting to me about it yesterday and reckoned we'd be mad to give up the rental income on our BTL, which I do tend to agree with. Our interest payments are currently £95 per month, rental income £550.
Having no knowledge of the current mortgage market, I wondered if someone may be able to tell me how easy it would be to add to our mortgage on our to fund the extension to our own house. I currently pay no additional endowment, and seem to remember this now being a requirement for all interest only mortgages. Is this true?
Aargh, I'm clueless!
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Comments
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Current Lender is Lloyds TSB0
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You'd remortgage the BTL property and by doing this you could borrow 75% of the value, or the amount which corresponds with the formula used by the lender, for example, rent = 125% of monthly mortgage interest based on 6%pa.
With rent at £550 per month, you could borrow £88,000, but 75% of £115,000 is £86,250, so that would be the maximum amount you could borrow.
With £86,250, less fees/costs and the outstanding mortgage to be repaid, you'd have about £40k left over to pay for your extention.
You do not need a repayment vehicle, BTL lending assumes the property will be sold to repay the mortgage.
You will not be able to offset the increased interest against the rental income for tax purposes, IMHO.I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
You do not need a repayment vehicle, BTL lending assumes the property will be sold to repay the mortgage.
Interesting, thanks.
You will not be able to offset the increased interest against the rental income for tax purposes, IMHO.[/QUOTE]
Ah, this was my next question, thanks.0 -
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So, it seems that it would make more sense to increase the mortgage on the BTL.
Already given current tenants notice :-(0 -
Thrugelmir wrote: »Question is will they allow you to retain the existing rate?
Yes, that will be an interesting one. I'd doubt it, but wouldn't that be nice!0 -
You need to seek professional advice on tax issues. As you are using the funds for a non-business related issue, the increase borrowing should not see the increased interest treated as a trading expense, in my opinion.
But you never know - get advice!I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0 -
FWIW your chances of additional borrowing from Lloyds on a BTL at a decent rate are slim and none...I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.0
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kingstreet wrote: »FWIW your chances of additional borrowing from Lloyds on a BTL at a decent rate are slim and none...
That's what I expected, but we need to look into it before we discount it. Any pointers on where I should look?0
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