Releasing Equity

chris344

Hi all,

My current property is on sale for £625k and I owe £356K. I am selling in order to release some money in order to pay some debts and buy further out of Central London.

Rather than selling (as I like the location and conformable) I am thinking about releasing some equity of about £150k in order to buy a 1 bedroom flat (and pay debt) to rent out as a buy to let.

How does releasing equity in an existing property work as in adding £150k to the existing mortgage? Do Banks typically allow this?

My joint income is around 100k.

Thank you.

kingstreet

Releasing equity is just another word for borrowing.

You are looking for;-

additional borrowing from your existing lender on top of your current mortgage

or

a secured loan (second charge) from another lender on top of your mortgage

or

a remortgage, which is a whole new mortgage and this repays the current mortgage and allows you the debt consolidation and property purchase funds you require.

There are pros and cons for each which will be determined by your individual circumstances.

An independent broker would be able to discuss these with you if you don't wish to undertake the research yourself.

ducky2004

chris344 wrote: »

Hi all,

My current property is on sale for £625k and I owe £356K. I am selling in order to release some money in order to pay some debts and buy further out of Central London.

Rather than selling (as I like the location and conformable) I am thinking about releasing some equity of about £150k in order to buy a 1 bedroom flat (and pay debt) to rent out as a buy to let.

How does releasing equity in an existing property work as in adding £150k to the existing mortgage? Do Banks typically allow this?

My joint income is around 100k.

Thank you.

If you going to do equity release and not selling it. Then call the bank to ask to borrow £150k , taking your LTV to 356+150 = £506k / £625k = 81%. Assuming your bank agree with your valuation and bearing in mind asking price is not the same as the value of the property, increasing your LTV from <60% to >80% and your mortgage rate will go up by 100 bp or more.

Also, £100k joint to borrow £506k is 5x *joint* income. Post MMR this will be difficult.

amnblog

In theory you can do this but their are two key factors you need to bear in mind.


1. You are tight on affordability which will discount a large list of potential lenders.


2. They are limits set by lenders on loan to value when raising capital on a re-mortgage - this will exclude a further set of lenders.


Your actual valuation will be key and you may need to compromise on the total funds raised.


Unless the flat you are looking to buy to let has a price tag well above average, or you need the funds for something else, I would suggest you do not need to raise as much as £150K.

Thrugelmir

How much other debt do you owe?