Can I re-mortgage investment properties for new acquisitions?
- Credit: Getty Images/iStockphoto
I am a landlord with five properties, all of which are mortgaged with between 10 and 20 years to run on the mortgages. Property price increases mean that I probably have available equity within my current properties to re-mortgage them to raise sufficient capital for a deposit on a further property. Will a mortgage lender let me do that? I have cash to put towards the deposit but would like to hold some of that back as emergency funds.
Diane Fish of Smith & Pinching responds:
I’m pleased to say that you are likely to be able to re-mortgage your current investment properties to provide funds for new acquisitions if their value has increased sufficiently. However, you must use a specific Buy-to-Let mortgage for your borrowing, which is assessed in a different way to a personal mortgage. Affordability assessments are equally critical for both personal and Buy-to-Let mortgages, but the latter will be assessed for affordability, predominantly on rental income rather than the landlord’s income from employment, so the amount you can borrow will depend on this factor.
Buy-to-Let mortgages usually have a maximum loan to value ratio of 75%, so you will need to cover at least 25% of both the existing properties and your new purchase with either equity in the owned property or deposit monies for the new purchase. You may be able to do this through the overall increase in values or use savings to top it up as needed. Don’t forget that there will be additional Stamp Duty Land Tax (SDLT) payable on any new property you purchase too – as well as professional fees.
With multiple rental properties, you are treated as a Professional Landlord – also known as a Portfolio Landlord – by lenders. This treatment normally applies to landlords with four or more properties. Some lenders have specific rates for landlords, and all are likely to require a schedule of your other properties. The market for Portfolio Landlord mortgages is quite active now and there are some good deals to be had. It’s important to shop around…
I suggest you take independent mortgage advice to ensure that you get the right mortgage in place for your needs.
Your home may be repossessed if you do not keep up payments on your mortgage. There will be a fee for the mortgage advice. The precise amount will depend upon your circumstances, and the type of lending taken. Smith & Pinching’s minimum advice fee is £700. Any opinions expressed in this article do not constitute advice.
For more information, please visit www.smith-pinching.co.uk