Use house as equity for buying another
It is estimated that over a million Brits own holiday homes overseas whilst many more own investment properties in the UK. During the last decade, property has become an important part of many people’s investment portfolios as increasing numbers of people shied away from shares and other traditional ways of saving money.
One of the most popular ways to fund the purchase of a second property has been to use cash raised from a loan secured on your main residence. And, secured loans are a great way to release equity to buy another house.
How Secured Homes Can Help You ‘Let To Buy’
A common problem that many people have is that they would like to move home but they need the equity in their current home to fund the new purchase. While the housing market is slow people can find it tough to sell their property and so they are effectively ‘stuck’ in their home.
However, by using a secured loan – a loan based on the equity in your home – you can raise the deposit or purchase price of your new home. You can use the equity in your current home to move house and retain your existing property as an investment. And, the rental income generated from your existing property will often cover your mortgage and secured loan repayments.
You can then sell your existing property in the future once the market recovers, and repay your mortgage and home equity loan in the process.
Building a Property Portfolio
If you’re looking to build up a portfolio of investment properties then you will need some initial capital. You’ll either need the purchase price of a second property or you’ll need to raise the deposit needed. Typically, 25-40 per cent of the purchase price is needed to be agreed for a ‘buy to let’ mortgage.
A secured loan can help you to release equity to buy another house. If you have equity in your property – the difference between the value of your home and any outstanding mortgage – you can use a home equity loan to access this cash. You will repay the home equity loan over a term of 3-25 years.
You can then use this money as the deposit for your second property purchase and use a ‘buy to let’ mortgage for the remainder. The home equity loan can also cover any associated costs such as valuation charges, legal fees or stamp duty land tax.
If you have lots of equity in your home then you may be able to agree to a larger home equity loan, releasing enough equity to buy multiple properties.
Buying an Overseas or Holiday Home
Many Brits have a dream of owning a foreign home – either for their own use or as an investment. Spain, Italy, France, Cyprus, the USA and Bulgaria have all been popular destinations for Brits buying holiday homes in recent years.
A homeowner loan helps you release equity to buy another house in the UK or abroad. You use the equity in your main home as the deposit – a foreign currency mortgage will fund the remainder – or to enable you to buy a holiday home outright.
And, if you plan to rent out the property to friends or family, the income you generate will help you to meet the repayments on your home equity loan.
To access the money tied in your home equity and get a great loan rate, book an appointment with the Mortgage Genie.