Raising capital from a rental property

by Readers Question

9:53 AM, 5th February 2016
About 3 years ago

Raising capital from a rental property

Make Text Bigger
Raising capital from a rental property

I own a 2 bed rental property that I would like to raise capital from by taking out a buy to let mortgage. I have a good tenant who appears to be a long term prospect. Raising capital from a rental property

This is new territory for me and I’m not sure the best way to go about arranging a buy to let mortgage on a property that I already own.

Should I use a broker or go direct to a mortgage provider?

Also, the property is of low value (£45k) and I believe this might cause difficulty.

The property value is in keeping with the location and not due to poor quality maintenance or decor etc.

Are there any buy to let mortgage providers that are open to mortgaging a property of this value?

Any advice or thoughts would be much appreciated.

Thanks in advance.

Lisa



Comments

Joe Bloggs

22:52 PM, 6th February 2016
About 3 years ago

I WOULDNT USE A BROKER FOR SUCH A SMALL LOAN UNLESS THEY DONT CHARGE THE APPLICANT A FEE.

I THINK MOST LENDERS WONT LEND ON LOW VALUE PROPERTIES SUCH AS THIS, BUT YOU WILL NEED TO CHECK.

Martin Gardner

13:22 PM, 7th February 2016
About 3 years ago

Assuming it's rented, I would imagine you already have a buy to let product or you have permission from your current lender to let the property under your residential mortgage or you own it outright. If you have a lender already it cheaper to asked them direct if you do have permission or if fully owned. never had a but to let at such a low value, but think 40k was minimum with some lenders.

Lisa Notner

13:33 PM, 7th February 2016
About 3 years ago

Thanks Joe for your advice. I might try and approach some lenders direct and see where that gets me.

Martin, thanks for your comments. I own the property fully and was hoping to raise some capital from it. North Ayrshire is a relatively poor part of Scotland and house prices are very low in general. This has enabled me to buy 2 properties in addition to my own home. This 2 bed flat and a 1 bed flat in Prestwick which I am refurbishing at the moment. The value of the 1 bed flat will be higher than the 2 bed once refurbishment is completed and I may well try to raise some capital on that one. I would expect it to be valued at between 55k and 60k.
I realise that I'm probably the ultimate small fry in this business but a start is a start and I'm hoping that with time I'll be able to grow things. Now is clearly not the most attractive time to venture into this field but I think that with care and thought it will work out ok.
I'm finding this site really informative.

Howard Reuben CeMap CeRER

20:17 PM, 7th February 2016
About 3 years ago

As with any business, there are costs to arrange services (or buy products) and quite often the 'headline' charge is what sways the buyer.

However, to say "I WOULDNT USE A BROKER FOR SUCH A SMALL LOAN UNLESS THEY DONT CHARGE THE APPLICANT A FEE." is a false economy, for many reasons.

Firstly, whether or not a fee is charged (by the way, we always charge a fee for our professional service, we're not a pro bono charity that gives away our hard earned qualifications and the time we have to spend on ongoing training for the everchanging regulations, for example) certain mortgage lenders and products are only available via authorised and approved Intermediaries. So by ignoring brokers, this could, therefore, disadvantage the borrower by not allowing themselves access to potentially better value deals.

Secondly, the perception by some that a broker is merely a mortgage salesman, overlooks the service that a professional financial adviser brings, enabling more speedy and efficient application-to-offer processes, document checking, valuation appeals, income and ID verification, chasing solicitors for completion etc.

Thirdly (and lastly for now - I could go on) a true financial adviser reviews the whole current financial situation and will endeavour to arrange the required mortgage based on your current needs and future flexibility requirements. So much goes in to this that there is too much to summarise and list here.

By all means, buy a product from a no fee mortgage salesman, however as a lot of my work is instructed to trouble shoot such cases at the 11th hour because it all went (inevitably) wrong, so I simply say caveat emptor.

Finally, £40k is a very low property value and really there is only one lender who might consider it. £50k is a slightly easier property to offer for mortgage security but a lot of lenders do now use £75k as the minimum.

Richard Connell

21:30 PM, 7th February 2016
About 3 years ago

I appreciate Howard's comments above about fee free mortage advisors but I have used Graeme at First Mortgage in Falkirk and for standard BTL he has been very good.
I would recommend having a chat with him initially anyway to give you some options.

Joe Bloggs

22:52 PM, 7th February 2016
About 3 years ago

Reply to the comment left by "Howard Reuben" at "07/02/2016 - 20:17":

WELL, YOU WOULD SAY THAT WOULDNT YOU...

A BROKER HAS THE SAME DUTY OF CARE AND DUE DILIGENCE WHETHER THEY CHARGE THE BORROWER A FEE OR NOT.

BROKERS MAKE PLENTY FROM THE COMMISSION PAID BY LENDER. MY BROKER DONT CHARGE AND I GET A V GOOD AND HONEST SERVICE.

Howard Reuben CeMap CeRER

23:14 PM, 7th February 2016
About 3 years ago

Reply to the comment left by "Joe Bloggs" at "07/02/2016 - 22:52":

Joe, once again you try to provoke by misrepresenting the facts. "Brokers make plenty....." for one example. Really? So, if a Broker provided the full due care and attention and time to source, place, progress and complete a £40k mortgage without charging a Professional Fee, how much "plenty" do you think is earned? I guarantee most people would not want to work several hours for a total £80 net. Do you really have any idea how much lenders pay a Firm for a £40k mortgage? You do now.

Once again Joe, you speak without substance. Your previous attempts to provoke are still recorded on file, as is your previous profile that you removed and replaced.

I am delighted that your Broker assists you so well. Not all 'Brokers' are alike though - see my previous post.
Howard Reuben recently posted...Meet The HD Consultants Team - Mortgage & Protection | Buy To Let | Colchester

Howard Reuben CeMap CeRER

23:23 PM, 7th February 2016
About 3 years ago

Reply to the comment left by "Richard Connell" at "07/02/2016 - 21:30":

Richard, there are very many good Brokers in the UK and Graeme is no doubt one of them. And no doubt Mr Bloggs' Broker is great as well. With so many borrowers and yet so few good Brokers out there, there is room for many professional Brokers across the land

Neil Robb

17:56 PM, 8th February 2016
About 3 years ago

Hi

If you are hoping to buy more properties find a Financial Adviser who will help and guide you and help what you want to achieve.
If you apply for a mortgage with the wrong lender then get turned down it can affect your credit rating as it will show as being turned down.
You are doing ok having two flats no mortgage and your own home. There is plenty of people who would love to have this.
I would rather have ten small mortgages than one large one.
Recent story Two properties both two bed mid terraced properties one cost the £325.000.00 rent £975 to £1100.00 if got the right tenant the other cost £25,000 now worth £50,000. Rent £450.00. I know which one I would want to own.

Alison King

18:11 PM, 8th February 2016
About 3 years ago

It's worth having a browse about on a mortgage comparison site and having a look at which companies are offering the best rates. Then you can go onto their own website where terms and conditions are usually spelled out in a lot of detail. If you still can't find enough information about their minimum values just give them a call to clarify their conditions. I cannot see how doing that could possibly impact your credit rating. Check that they are not an "intermediary only" company. If they are then you would have to go through a broker or adviser.
The big thing to watch out for on low value mortgages are fixed fees. £1,900 is a big dent when the whole mortgage is only £40k. Look for no fee deals or fees that are calculated as a percentage of the loan. I usually divide the fees and any broker costs by 24 months (or whatever the discounted period is) and add that on to the monthly costs to get a proper comparison.

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Is Shelter a charity?

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More