Property investment advice - is this small change in grand scheme of things?

Newlyboughthouse

AlanP_2 said:

Newlyboughthouse said:

Aceace said:

Newlyboughthouse said:

Hi all

I have a dilemma. I signed up for a 2 year remortgage fix at the start of November (too late to get out of cooling off period). I have an outstanding balance of £55,000 on my mortgage on a house worth around £280,000. 

I want to remortgage to release the equity to invest, however, the penalty is a psychological blocker for me (2%). So I would have to pay £1,100 penalty. Like most probably I am averse to paying avoidable charges, but I know obviously sometimes this is inevitable. The rate reduces to 1% penalty in year 2 of the fix.

What are your thoughts - is this small change, or would you wait, continue to aggressively pay down the outstanding balance to potentially get a lot more equity out in a year or 2?

You don't say how much of the equity you're planning to invest, but if its a large portion then yes it's small change. E.g. if you were planning on investing £150k then the fee only represents 0.7%. Personally, I don't have the balls to risk the equity in my home. 

My plan with the remortgage funds are to part put into property bonds, part buy a flip property, part buy a holiday home.

What do you guys think - would you think nothing of the penalty and do it now or wait?

The penalty wouldn't worry me. Putting too many eggs in a flip property or a holiday home would bother me. I prefer to diversify my investments over multiple properties (or other investments). If I had particularly strong and relevant skills that I could use to add value it might be different (builder, interior designer, etc). Sadly I don't, perhaps you do. 

Also, I'm not keen on the holiday home concept. My father bought a time-share and we soon got very bored with having to holiday in the same place to feel that we were getting value out of it. Each to his own though. 

Thanks

I've added my thoughts in bold above. 

This may sound naive (we all start somewhere) but with regards your comment about not having the balls to risk the equity in your home, What risks do you see? 

Losing your house!

In what circumstances would I lose my house? The mortgage repayments will be stable far into the foreseeable? Very stable and decent income from my salary. Sorry if I'm missing something?

Aceace

Newlyboughthouse said:

Aceace said:

Newlyboughthouse said:

Hi all

I have a dilemma. I signed up for a 2 year remortgage fix at the start of November (too late to get out of cooling off period). I have an outstanding balance of £55,000 on my mortgage on a house worth around £280,000. 

I want to remortgage to release the equity to invest, however, the penalty is a psychological blocker for me (2%). So I would have to pay £1,100 penalty. Like most probably I am averse to paying avoidable charges, but I know obviously sometimes this is inevitable. The rate reduces to 1% penalty in year 2 of the fix.

What are your thoughts - is this small change, or would you wait, continue to aggressively pay down the outstanding balance to potentially get a lot more equity out in a year or 2?

You don't say how much of the equity you're planning to invest, but if its a large portion then yes it's small change. E.g. if you were planning on investing £150k then the fee only represents 0.7%. Personally, I don't have the balls to risk the equity in my home. 

My plan with the remortgage funds are to part put into property bonds, part buy a flip property, part buy a holiday home.

What do you guys think - would you think nothing of the penalty and do it now or wait?

The penalty wouldn't worry me. Putting too many eggs in a flip property or a holiday home would bother me. I prefer to diversify my investments over multiple properties (or other investments). If I had particularly strong and relevant skills that I could use to add value it might be different (builder, interior designer, etc). Sadly I don't, perhaps you do. 

Also, I'm not keen on the holiday home concept. My father bought a time-share and we soon got very bored with having to holiday in the same place to feel that we were getting value out of it. Each to his own though. 

Thanks

I've added my thoughts in bold above. 

This may sound naive (we all start somewhere) but with regards your comment about not having the balls to risk the equity in your home, What risks do you see? 

I'm open to high risk investments, but there's a portion of my wealth that I consider to be an untouchable safety net, except for extreme emergencies. My house is the absolute cornerstone of this. It's paid for (no mortgage), so no matter what happens I will always have somewhere comfortable to live. The next level up would be my premium bonds. I would keep these even if they paid zero interest. They are my easily accessible,  totally safe, emergency buffer. Then there's a few interest bearing current/savings accounts and cash ISAs with a minimum of 1 year's living expenses in total, often much more if I'm planning for some known expenditure. I also have some DB pensions that will kick in in a few years time. Everything else is fair game to be invested in a very diverse mixture of very low to very high risk investments (fun money).

I wouldn't risk the equity in my house because you never know what might happen in the future. Once you invest that money you can never be absolutely sure that you will get it back, no matter how safe you judge the investment to be. The point here is that there are risks that we just can't see. Take coronavirus for instance,  not many saw that coming. What if some uninsured event happened to you that left you unable to work?

I guess my house is a comfort blanket that allows me to play with my investable cash without undue worry. I'm not saying that everyone should do this. We're all free to make our own life decisions. If you're comfortable with risking all for a chance to make a bit of extra cash,  and you really have fully understood the consequences, then good luck to you. Of course, there may be others (family?) whose interests needed to be taken into consideration too. (Sorry if that last sentence sounds a bit preachy, but I thought it was an important point).

Newlyboughthouse

Aceace said:

Newlyboughthouse said:

Aceace said:

Newlyboughthouse said:

Hi all

I have a dilemma. I signed up for a 2 year remortgage fix at the start of November (too late to get out of cooling off period). I have an outstanding balance of £55,000 on my mortgage on a house worth around £280,000. 

I want to remortgage to release the equity to invest, however, the penalty is a psychological blocker for me (2%). So I would have to pay £1,100 penalty. Like most probably I am averse to paying avoidable charges, but I know obviously sometimes this is inevitable. The rate reduces to 1% penalty in year 2 of the fix.

What are your thoughts - is this small change, or would you wait, continue to aggressively pay down the outstanding balance to potentially get a lot more equity out in a year or 2?

You don't say how much of the equity you're planning to invest, but if its a large portion then yes it's small change. E.g. if you were planning on investing £150k then the fee only represents 0.7%. Personally, I don't have the balls to risk the equity in my home. 

My plan with the remortgage funds are to part put into property bonds, part buy a flip property, part buy a holiday home.

What do you guys think - would you think nothing of the penalty and do it now or wait?

The penalty wouldn't worry me. Putting too many eggs in a flip property or a holiday home would bother me. I prefer to diversify my investments over multiple properties (or other investments). If I had particularly strong and relevant skills that I could use to add value it might be different (builder, interior designer, etc). Sadly I don't, perhaps you do. 

Also, I'm not keen on the holiday home concept. My father bought a time-share and we soon got very bored with having to holiday in the same place to feel that we were getting value out of it. Each to his own though. 

Thanks

I've added my thoughts in bold above. 

This may sound naive (we all start somewhere) but with regards your comment about not having the balls to risk the equity in your home, What risks do you see? 

I'm open to high risk investments, but there's a portion of my wealth that I consider to be an untouchable safety net, except for extreme emergencies. My house is the absolute cornerstone of this. It's paid for (no mortgage), so no matter what happens I will always have somewhere comfortable to live. The next level up would be my premium bonds. I would keep these even if they paid zero interest. They are my easily accessible,  totally safe, emergency buffer. Then there's a few interest bearing current/savings accounts and cash ISAs with a minimum of 1 year's living expenses in total, often much more if I'm planning for some known expenditure. I also have some DB pensions that will kick in in a few years time. Everything else is fair game to be invested in a very diverse mixture of very low to very high risk investments (fun money).

I wouldn't risk the equity in my house because you never know what might happen in the future. Once you invest that money you can never be absolutely sure that you will get it back, no matter how safe you judge the investment to be. The point here is that there are risks that we just can't see. Take coronavirus for instance,  not many saw that coming. What if some uninsured event happened to you that left you unable to work?

I guess my house is a comfort blanket that allows me to play with my investable cash without undue worry. I'm not saying that everyone should do this. We're all free to make our own life decisions. If you're comfortable with risking all for a chance to make a bit of extra cash,  and you really have fully understood the consequences, then good luck to you. Of course, there may be others (family?) whose interests needed to be taken into consideration too. (Sorry if that last sentence sounds a bit preachy, but I thought it was an important point).

Totally get that. I am single by the way and free of any family responsibility (bar my dogs).
My view is, noone ever got rich from playing it completely safe. In my judgement, while it isn't completely risk-free, it is safe enough to release the equity to make onwards investments. 
I think I'm going to go down buy, refurb, let, then flip route with a couple properties in a Ltd company - that way entrepreneur's relief will also apply in a couple years.

eskbanker

Newlyboughthouse said:
My view is, noone ever got rich from playing it completely safe.

The obvious flip side being that plenty have become impoverished by taking risks!

Clearly there's a balance to be struck though, but always best to make informed decisions in full sight of all pertinent facts, and investment conditions have been generally favourable for a long time now, which won't continue for ever....

AnotherJoe

Newlyboughthouse said:

Hi all

I have a dilemma. I signed up for a 2 year remortgage fix at the start of November (too late to get out of cooling off period). I have an outstanding balance of £55,000 on my mortgage on a house worth around £280,000. 

I want to remortgage to release the equity to invest, however, the penalty is a psychological blocker for me (2%). So I would have to pay £1,100 penalty. Like most probably I am averse to paying avoidable charges, but I know obviously sometimes this is inevitable. The rate reduces to 1% penalty in year 2 of the fix.

What are your thoughts - is this small change, or would you wait, continue to aggressively pay down the outstanding balance to potentially get a lot more equity out in a year or 2?

My plan with the remortgage funds are to part put into property bonds, part buy a flip property, part buy a holiday home.

What do you guys think - would you think nothing of the penalty and do it now or wait?

Thanks

Its certainly small change compared to all the set up costs, SDLT, income tax and perhaps CGT you'll be paying, yeh.