Releasing money when remortgaging

Mikec1985

Hello,

I have a buy to let property in addition to my mortgaged first home. I am re-mortgaging my buy to let shortly. I have spoken to a bank regarding the re-mortgage, basically it has risen in price and I wish to keep my LTV at 75% and pocket the increase in value in cash and increase my mortgage which is interest only anyway. I have been told that due to money laundering rules that I can not release cash as such and can only use any money released on specific things for example paying off credit cards, a kitchen and paying off some of my other mortgage. This is the first I have heard of such a thing and obviously I am wondering if it is true for all lenders or just the one I have spoken too.

thanks in advance.

Landofwood

If you are remortgaging (moving to a new lender), you will effectively start a brand new mortgage. You will select a product (75% LTV) and the lender will value your property.

Any excess completion monies will be released to you by you solicitor.

Mikec1985

Thank you Landofwood. I did think that what you have described happened. The bank I had approached was the Metro bank so maybe they have different rules being a newer/smaller lender.

Thrugelmir

The purpose of the equity release may determine the success of your application. Property is no longer treated as an ATM.

Mikec1985

Thanks for the reply. The bank suggested that the purpose of releasing the equity was important basically meaning that straight cash wasn't an option. Maybe a sensible view for the home you live in and paying the mortgage off of, but it doesn't seem to figure in relation to a buy to let as it more tax efficient for the equity in the property to be as low as possible.

silvercar

Mikec1985 wrote: »

Thanks for the reply. The bank suggested that the purpose of releasing the equity was important basically meaning that straight cash wasn't an option. Maybe a sensible view for the home you live in and paying the mortgage off of, but it doesn't seem to figure in relation to a buy to let as it more tax efficient for the equity in the property to be as low as possible.

Only sensible if the equity you are taking out will generate more interest than you are being charged on the mortgage accounting for the lower tax you will pay on the business profit. Don't let the tax "tail" wag the business model "dog".

Taking the money out for home improvements or equity in a new property usually is considered a good enough reason. Increasing your equity in your main home may also be considered acceptable.

Mikec1985

Well it does sound that the banks policy is as you 2 helpful people have detailed. So in short I need a good reason for the use of the equity released. The decision to release as much as I can is fairly straight forward despite the effect on my actual business profit. I did intend to pay my credit cards and putting the maximum into my main property makes sense (as at a higher interest rate bizarrely). So just need to invent something else to get some cash for a new wardrobe.

getmore4less

Mikec1985 wrote: »

Hello,

I have a buy to let property in addition to my mortgaged first home. I am re-mortgaging my buy to let shortly. I have spoken to a bank regarding the re-mortgage, basically it has risen in price and I wish to keep my LTV at 75% and pocket the increase in value in cash and increase my mortgage which is interest only anyway. I have been told that due to money laundering rules that I can not release cash as such and can only use any money released on specific things for example paying off credit cards, a kitchen and paying off some of my other mortgage. This is the first I have heard of such a thing and obviously I am wondering if it is true for all lenders or just the one I have spoken too.

thanks in advance.

Mikec1985 wrote: »

Well it does sound that the banks policy is as you 2 helpful people have detailed. So in short I need a good reason for the use of the equity released. The decision to release as much as I can is fairly straight forward despite the effect on my actual business profit. I did intend to pay my credit cards and putting the maximum into my main property makes sense (as at a higher interest rate bizarrely). So just need to invent something else to get some cash for a new wardrobe.

What's the problem?

You have the reasons the bank asked for you will just get the cash from the process and then if that wardrobe needs buying it will be on the CC for a day.

job done.

kingstreet

There are lenders who will do capital raising BTL remortgages.

Mikec1985

Well there isn't a major need to release capital but I would like too ideally take some out and interested to have the option. From what the last reply says there are 2 types of mortgages one with capital release. I am now wondering if anyone know which lenders had that option and any general information. This is more confusing then I first invisaged!

kingstreet

The mortgage is exactly the same, just that some lenders will permit capital raising and others won't.

You may find it sensible to speak to a broker as the market for BTL products is still broker-centred and may aren't available direct.