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Equity release from inherited house?
Pledge17
Posts: 2 Newbie
Hi
We inherited my mums small house nearby a few years ago and have had a tenant in for a few years. We would like to retain the house as we may move in there when we retire in 10 years. We also have our own home. Both homes are now mortgage free. Is it logical to obtain a buy to let mortgage on the rented property - paid for by the tenant and reinvest the released equity? We would need to obtain a small income from this to replace some of the rental income.
We inherited my mums small house nearby a few years ago and have had a tenant in for a few years. We would like to retain the house as we may move in there when we retire in 10 years. We also have our own home. Both homes are now mortgage free. Is it logical to obtain a buy to let mortgage on the rented property - paid for by the tenant and reinvest the released equity? We would need to obtain a small income from this to replace some of the rental income.
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Comments
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Which will be higher, the BTL mortgage rate, or the rate of return on invested capital?Is it logical to obtain a buy to let mortgage on the rented property - paid for by the tenant and reinvest the released equity?
The answer to this will answer your question about what is logical.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 -
How would you get a better return than a mortgage free rental property?0
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This.kingstreet wrote: »Which will be higher, the BTL mortgage rate, or the rate of return on invested capital?
The answer to this will answer your question about what is logical.
Bear in mind that the interest you pay on the BtL mortgage can be set against the rental income for tax, but capital repayments can't be.
Even with that, you may find it cheaper to mortgage your own home, because a BtL mortgage may be charged a higher rate.0 -
I think it's unlikely you find somewhere to invest the money released which will give a return sufficient to outweigh the interest charged on a BTL mortgage. Yes, you can offset the interest payments against rental income, but you'll also pay tax on the income generated from the lump sum released.
If the BTL mortgage is at 5% which seems about the going rate, then I don't think you'll find a low risk return of this level. Even the recent pensioner bonds were only 4%.0 -
Many thanks to you all
I suppose the logic in my thinking was that a capital repayment mortgage for the long-term would be paid off by rental income leading to us eventually owning the house again. In the meantime an invested sum would deliver a very small income with perhaps some interest retained to keep the investment sum in line with inflation.0
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