Loan from rental property

Caldosan

Hello MSE,

I have tried to use search to find an old answer so forgive me if this has been asked before.

I have a question regarding the best way to release cash from a rental property.

I own a building outright (no mortgage) and I rent this property for £1400 PCM. The value is approx £131000 (zoopla - but you get the idea). I would like to know how to release 50% of the value for personal use, not to reinvest in rental property. I am not near retirement so the equity release plans of that type aren't appropriate for me.

Secured loans seem to be more for debt consolidation, BTL seem to require that I am either improving the rental property with the loan or re-investing in another BTL property. Have I missed something or is their a third way.

Your help is appreciated

:beer:

Ebe_Scrooge

I don't think you'll be able to do this.


The "traditional" way would be to take out a mortgage secured against the property. But as you've already discovered, most mortgage lenders will only do this if you're using the money to either improve ( add value to ) the property, or invest in another property.


No-one would give you an unsecured loan of £65K. Short of selling the property, I don't think you'll be able to do what you want.


Without wishing to pry, what are you intending to use the money for ? If we know that we may be able to offer some constructive advice.

HappyMJ

Caldosan wrote: »

Hello MSE,

I have tried to use search to find an old answer so forgive me if this has been asked before.

I have a question regarding the best way to release cash from a rental property.

I own a building outright (no mortgage) and I rent this property for £1400 PCM. The value is approx £131000 (zoopla - but you get the idea). I would like to know how to release 50% of the value for personal use, not to reinvest in rental property. I am not near retirement so the equity release plans of that type aren't appropriate for me.

Secured loans seem to be more for debt consolidation, BTL seem to require that I am either improving the rental property with the loan or re-investing in another BTL property. Have I missed something or is their a third way.

Your help is appreciated

:beer:

What do you want £65,000 for? If it's a deposit on a property you want to live in then yes it's possible. If you need to buy a car then yes it "may" be possible but there is other forms of credit which is cheaper.

If you want the money just to put into your current account and use or day to day spending then you'll find it more difficult.

You could take out a Let to Buy mortgage to buy another house to live in then a few years (months?) down the line sell the house you live in and now you've got the cash in your hand. You've met the T's and C's by buying a property with the money. Nothing says you have to repay the mortgage with the money you get when you sell.

Caldosan

Thank you for your reply, I don't think you are prying at all , I was going to use it extend my own home so not related to the property in the original post, at the same time the interest part of the repayments would reduce that part of my tax bill related to the rentals. Seemed like a win/win but that's okay, I'll just have to wait and save up. Would have been nice though.

Caldosan

"You could take out a Let to Buy mortgage to buy another house to live in then a few years (months?) down the line sell the house you live in and now you've got the cash in your hand. You've met the T's and C's by buying a property with the money. Nothing says you have to repay the mortgage with the money you get when you sell."

Interesting. Thankyou

Ebe_Scrooge

That's a nice idea about getting a Buy To Let mortgage then selling after a few months. Of course you'll have the usual estate agents and solicitors fees to factor in.


I can see exactly where you're coming from in terms of reducing your tax bill on the rental property. It may be worth approaching a few lenders and see what the score is with a secured loan against the rental property. As long as you're up-front about the purpose of the loan you're not going to be done for fraud or anything daft like that ! The only thing I don't know is whether you'd then be able to offset the interest payments against your tax. I suspect not, as the money is not a business-related expense. If you were using it to improve the rental property then you'd have no problem.

Clive_Woody

Caldosan wrote: »

Thank you for your reply, I don't think you are prying at all , I was going to use it extend my own home so not related to the property in the original post, at the same time the interest part of the repayments would reduce that part of my tax bill related to the rentals. Seemed like a win/win but that's okay, I'll just have to wait and save up. Would have been nice though.

Could you not borrow the money against your own home if it is to be used to extend that property?

Sorry if I am missing something obvious.

Caldosan

Hi, good question, simple answer is to do with tax again. Increased mortgage requires proof of increased income, meaning increased dividends from the business (I leave a lot of profit in the business) meaning higher corporation and personal taxation.

Mortgaging one of my rental properties gives me the capital and avoids that situation.

I think I have found a BTL company that will lend and once I've run it by my accountant I will let the forum know how that worked out.

Thanks again