Remortgage of Unencumbered Property for Home Improvements

Ricardo51

My partner and I own 3 properties; one we live in, one is let, the third will eventually be our retirement home. No. 3 needs complete renovation. All are unencumbered.
We will eventually sell No. 2 to finance No. 3 but not for a year or so, because we don't want to throw out our tenant until she's ready. However we want to start renovating now and don't have the ready cash.
Can we borrow 40K-50K on one of the existing properties for a year, on an interest-only basis? This doesn't seem to be an option on the comparison sites.

kingstreet

Subject to loan to value (Max 75%) and rental income (rent must be at least 125% of monthly interest, assuming 6% per annum) you should be able to remortgage the let property.

As this market is still broker-centred, you'll find the most likely lenders and better products via a whole market broker.

Ricardo51

Thanks Kingstreet. I guess it could be straightforward after all. The internet is surprisingly unhelpful if you are looking for something even slightly untypical.

getmore4less

you could look at offset

with the costs of setting up a loan might as well keep access to the funds in case they are needed again.

holly_hobby

The main advantage of using the let property (where true IO remains readily available, as it is unregulated lending) is that the associated mge interest is a permitted HMRC deduction* from your gross rental reciepts, as its classed as capital withdrawal under HMRC regs.

The futher considerations are that several lenders have a min earned income of 25k (which may not be an issue for you), and moreover as you don't have any current mge history to evidence debt management, to source a lender whom is happy to proceed on the basis that you don't have a current/recently redeemed mge, BUT do have your own privately owned residence independent of the let unit (of which there are a few lenders in the market).

Accordingly, given the variables, an experienced BTL broker, as Kingsteets advises, will really be the most productive and quickest route to source a suitable home for your enquiry (inc that any early redemption charges are consistent with your future objectives of redemption etc).

* deductable interest is capped at a mge amount equal to the value/or pch price, of the unit when it entered the business (ie became available for letting) - anything above this pivotal fig is not a permitted deduction from rental receipts.

Hope this helps gets the ball rolling ...

Holly xx

Ricardo51

Interesting point about the mortgage payments being deductible.
(BTW: what's IO?)

kingstreet

Interest Only.