Well thanks to a new “top up mortgage”, landlords are now able to take money from their investment properties to use as a deposit for another purchase, without any minimum income, stress test requirements or monthly payments made to the lender.
The “top-up mortgage” – so far the only one of its kind – sits alongside the landlord’s main mortgage. But it works differently from an ordinary mortgage in that no monthly interest is paid. Instead, at the end of the agreed term, typically between five and ten years, the borrower settles the top-up loan by paying back the original capital, plus a slice of the property’s increase in value over the period.
In this way some of the costs of the landlord’s total borrowings are deferred, and converted into a future, capital payment which could be made if the property is sold or refinanced.
What are the risks?
There are several terms and conditions attached to loan and these need to be fully understood by landlords. Additional stipulations apply to properties in London and not all properties will qualify. As with all secured loans, the property is at risk if the borrower does not repay according to the terms of the contract. There is also the risk that the primary lender will not agree to the addition of the loan. It’s essential you speak to an adviser who has been deemed competent to advise on these “top up mortgages”.
Antony Lane, one of our qualified advisers based in our Bedhampton office, said “the buy to let equity mortgage was launched in November last year and we have seen a high demand for this type of product. It works well for landlords who are looking to expand portfolios but have low yielding properties that are affected by a stress test, it also give landlords the chance to be in the unique situation where there is no hit on their income and they have ability to borrow up to 85% of the value of their properties”
Call Choice on 0800 612 8099 for more details.
Terms and Conditions apply. Your property may be repossessed if you do not keep up repayments on your mortgage. The Financial Conduct Authority does not regulate some forms of mortgage.