Buying flat to let with remortgaged money

[tenant]

Hello All,

I have been glad to find out from my lender that I can borrow some extra money, almost enough to buy a 1 bedroom flat (I am looking at Crystal Palace).

The lender is quite happy to remortgage for “house improvement” purposes though.

Here is a question: What are the potential troubles ahead if anyone goes ahead and takes an extra sum with remortgage for “house improvement” and buys a flat instead.

What one have to be aware/afraid of in such a situation?

Looking forward to hearing from you.

Cheers,
Mick

[susan 2]

Mick - back in the 1980's when BTL mortgages were not available, I remortgaged my house (which I had bought for £5000! oh happy days) for £37000. I then put down £11,000 deposits on three houses. These were the start of my property folio. The only time the mortgage companies started showing any interest, is when I missed a couple of payments, due to having to do fire regulations. Once I caught up I heard no more. To be honest if mortgage companies are paid on time, why would they want to know what you are doing with the money? They are just interested in lending and the more they can lend you the better in their eyes. So you might even think about buying two flats! Provided the rental return is O.K. Remember you can claim the interest part of the mortgage against tax. Good luck!

[Tax Accountant]

Hello All,

I have been glad to find out from my lender that I can borrow some extra money, almost enough to buy a 1 bedroom flat (I am looking at Crystal Palace).

The lender is quite happy to remortgage for “house improvement” purposes though.

Here is a question: What are the potential troubles ahead if anyone goes ahead and takes an extra sum with remortgage for “house improvement” and buys a flat instead.

What one have to be aware/afraid of in such a situation?

Looking forward to hearing from you.

Cheers,
Mick

The moral of Susan's reply is that if you think too much, you can't do most things.

By the sound of it, if you are almost financing the whole purchase price from the remortgage, you are doing well.

I would imagine that in a worst case scenario, the lender will ask you to take the whole mortgage elsewhere. However, I cannot imagine a situation when they would do this if your payments are always on time and you haven't stretched yourself too much.

The most important thing to remember is to be satisfied that you have a reasonably good lettings market for the property you wish to buy. If so, you can't go wrong.

As Susan says, if the sums add up, consider using the remortgage advance as deposits on more than one property and raise the main mortgage on the BTL properties themselves.

Ramnik

[JohnS ResidentBroker]

Mick,
most lenders are happy to remortgage and release your equity for the purposes of "buying other property" so you may find that the lender who you used would have been just as happy if you'd told them what you really were using the money for!

cheers
John

[Poj McDodge]

Would there be tax advantage in just getting a buy to let mortgage on the new property? It may not be worth it if the fees & interest rates much higher for BTL.

Reguarding the reason for the loan I wouldn't worry too much, to buy our first rental house my wife took out a car loan. Some years this did cause a few slight problems when asking / using interest statements.

[tenant]

Dear All,
Thank you all very much for your replies.

Mick