Releasing unneeded cash - is this fraud?

movingtomacc

We were in the process of remortgaging our BTL property, releasing some cash and using it to buy one more.

However, we have pulled out of the purchase due to the current environment and (unless something that is obviously great value comes up) expect to buy only sometime in the next 18 months or so.

So, when we informed our mortgage broker he said that we should continue with the remortgage for the same amount and keep the excess cash in the bank, ready to deploy when a property comes up. I asked him but will the bank lend for such a purpose when we don't have a specific property or timeframe to buy in, and he said that's not a problem.

If it is possible, I would certainly like to keep the cash ready to deploy even though it'll be in a zero interest account and costing me 1.67% in interest as we will most likely be buying in the next 18 months.

My question is, is my broker hiding something from me or is it ok to do what he suggests?

jaybeetoo

I can’t see what the problem is. You’ve remortgaged to release some equity. Unless there is a restriction on the new mortgage that says you must use the released equity to buy another property, you can do what you like with it.

secretdebt

Is it likely that they get commission on it if it goes ahead...and zero if you decide not to?

However, I guess it may be easier if you can get the cash now, as there is no guarantee that in the future that you would be able to release funds from the property at the current value/rates.

Thrugelmir

Seems little point in continuing with the transaction if you have no immediate need for the funds. Make your own decision don't be swayed by others.

movingtomacc

He'll get a pro-curation fee either way as I need to remortgage (40% LTV) since the fix is coming to an end but it will be a bit higher with the extra equity release (60% LTV).

secretdebt wrote: »

Is it likely that they get commission on it if it goes ahead...and zero if you decide not to?

However, I guess it may be easier if you can get the cash now, as there is no guarantee that in the future that you would be able to release funds from the property at the current value/rates.

SonOf

My question is, is my broker hiding something from me or is it ok to do what he suggests?

No. You either go ahead or you do not. it is a binary choice. Not difficult to understand.

Pro is that you have the money available now and go buy immediately knowing the funds are available.
Con is that you are paying the interest on the mortgage and cannot class it as an expense.

You dont have to keep the funds in a zero interest account.
And yes, the mortgage broker only gets the commission but they are going to get it in the end regardless. So, its unlikely they are doing it for personal reasons.

movingtomacc

Sounds good. I was just worried that the bank allows release of equity only for a specific reason. I just had a look at the ortgage offer and it doesn;t mention anyting about the reason for releasing cash.

Thanks all.

ACG

I can't help but think your broker has their best interest at heart rather than yours.

If he is a mortgage broker (not a financial advisor) then he is not qualified to advice on whether or not you shod raise funds for investment purposes.
How much of a coincidence is it that you should raise the EXACT same amount as you were previously applying for?
Are you happy to pay interest on a loan you may not need? Are you happy to take the money now and would you still be happy if interest rates dropped?

I am not saying you should or should not proceed, I just wonder whether or not your broker is working for your benefit or theirs?

movingtomacc

Sorry, I might have given the wrong picture.

I approached him for the remortgage and asked to release a certain amount of money to buy another BTL property.

When he gave us the green light, we offered on a BTL property, it was accepted and conveyancing was in progress. A few days ago, we decided to pull out as we got nervous and put off buying until 2020. Quite understandably, the vendor was not willing to wait that long as he needs to sell asap.

When we told our broker that we had pulled out (and also that we would definitely buy in the next 18 months) he said that the cash is there to be released and it's up to us as to what to do. He said that the current transaction falling through has no impact on the remortgage.

So he did not give us any investment advice.

And yes, we would definitely prefer it if the cash were sitting in the bank for us to purchase when needed and don't mind paying the interest on it. Unless something catastrophic happens to the economy, we will definitely be looking to buy in the new year.

ACG wrote: »

I can't help but think your broker has their best interest at heart rather than yours.

If he is a mortgage broker (not a financial advisor) then he is not qualified to advice on whether or not you shod raise funds for investment purposes.
How much of a coincidence is it that you should raise the EXACT same amount as you were previously applying for?
Are you happy to pay interest on a loan you may not need? Are you happy to take the money now and would you still be happy if interest rates dropped?

I am not saying you should or should not proceed, I just wonder whether or not your broker is working for your benefit or theirs?