Remortgage/Sell/Other?

[Nish]

Hi All,

A little advice if possible please.

I have two properties let out and my main residence. The aim is to increase the number of buy to lets to 3 or 4 by the end of the year.

1 of the properties is low value but has alot of equity built up.

Value - Approx 110k
Mortgage remaining - Approx 20k
Rental income - Approx 420 per month

It delivers a low yield but has always rented out (used to live there 9 years ago so just put in on rent rather then sell as it easily ocvers the mortgage payments).

So the question, should I sell this property, lets say for 100k, add a bit of cash and purchase two buy to lets at approx 250k each with 50k down on each, or remortgage this property, keep it, use what cash i can free up from it towards additional properties?

I should mention "normal" mortgage deals are hard for me to come by due to being a contractor, possibilty of buying properties via limited co rather then personally is an option i am looking into also however commercial finance rates are pretty bad.

My aim is to have 5 or so properties on let generating lets say 5k a month, which over the long term will be paid off (rental income plus overpayments) and leave me with some extra pocket money coming in, in say 15 years time.

Thoughts?

[Sarnie]

£200k mortgage on a £250k property is 80% LTV.

BTL lending in this LTV bracket is very strict indeed and the rates and fee's can be eye watering. Expect to pay an arrangement fee of anywhere between 1% and 3% of the advance. At this LTV they will underwrite the mortgage using the same criteria as a residential mortgage eg they will want proof of earnings in a format that is acceptable to them, which based on your comments, may be tricky.

Also, the rental would have to be huge to cover the mortgage payment by 125%.

Why not remortgage the £110k property to £82,500, which coincidentally is exactly 75% LTV, take the £62,500 and buy a £250k property at 75% to reduce the borrowing and also the associated rates and fee's?

Or use the £62,500 as 25% deposits on two £125k flats/houses??

[Nish]

Valid options.

However, given the low yield would a remortgage work on the property?

Or is the better option to sell entirely and use the capital more efficiently across 2 properties?

I take your point about 75% LTV, assuming a 250k property (if end aim is 5k a month, I would prefer to do this without creating a large chain of properties so not keen on multiples at 125k etc)I would need 62.5k deposit per property.

Sell at 100k, add 25k cash plus extra to cover stamp etc and you are into 2 properties at 250k each?

So the question boils down to sell or remortgage overall.

[Sarnie]

Nish said:

Valid options.

However, given the low yield would a remortgage work on the property?

Or is the better option to sell entirely and use the capital more efficiently across 2 properties?

I take your point about 75% LTV, assuming a 250k property (if end aim is 5k a month, I would prefer to do this without creating a large chain of properties so not keen on multiples at 125k etc)I would need 62.5k deposit per property.

Sell at 100k, add 25k cash plus extra to cover stamp etc and you are into 2 properties at 250k each?

So the question boils down to sell or remortgage overall.

The yield wouldn't be a problem. You'd have to take it on Interest Only to make it fit. £82,500 would be around £275 pm at circa 4%. You could then just overpay the mortgage to reduce the capital.

I'm not sure on the logic of selling it as you would only have an extra £17,500 to put toward the two other BTL properties you want, against remortgaging it and taking the £62,500 out of it. You've mentioned that you've never had a problem renting it out so not sure I'd be keen to sell it for two other properties of much higher values that you could struggle to rent out?

[smckeown]

I am in a similar position. BTL lenders are not offering much in the way of extending terms. My plan is to wait a few more years or until mortgage is paid off completely,then release about 50% of the equity to mortgage another cheap property.