first btl Remortgaging for Capital and First BLT

[Reece Corcoran]

I have bought my own home (3 bed semi) on with a 5 year fixed rate mortgage back in the beginning of 2018, now around 18 months into the 5 years. My plan for my first BLT property is to remortgage this house into a BLT mortgage, and extract the capital as part of the deposit on my new home.  

I am concerned that because I have committed to a 5 year fixed rate mortgage, I am not sure if I can remortgage or change to a BLT mortgage without paying excessive fees. Having just listened to TPP064 about mortgages, I now see the error of my ways in committing to a 5 year fixed and not weighing up the variable mortgage rates in my plan. 

I am looking to advice to people that have been in my position in the past or know what my options would be to achieve my goals? 

[tchughes]

You will undoubtably have early repayment fees on your current mortgage.

You should start by digging out the orginal mortgage KFi or mortgage offer for this mortgage. Then look for the section on early repayment fees. You can then work out what they are now and will be over the next few milestones. All lenders are different, but lot are phased e.g. 3% in the first few years, then 2% and then 1% in the final year.

Once you know where you stand you could work out if those early repayment fees are worth paying to access the capital you want to raise. What return on investment could you get with those funds? Is that a lot higher than the cost of the early repayment fees?

 

[Aston Carter]

Hi Reece,

As mentioned above you will have a penalty to pay should you wish to repay this mortgage, and it will likely be in the region of 3%. One avenue you may look to explore is keeping your current mortgage and either taking a second charge, or taking a further advance with your current lender. Rates might be slightly higher than current mortgage rates, but should still save you money against what penalties you would incur should you repay your current mortgage in full.

Drop me a message if you’d like to know more!

Aston

[Stuart Phillips]

You could port the existing deal over to your new residential property. Its not ideal, you end up either reducing the balance and paying some ERC, or increasing it and having two products with different inital terms. Ultimately you will pay more as a result somewhere down the line, but not the full ERC. Porting isnt just moving the mortgage, its a new application where you get to keep your product. So you do a purchase on your new residential and remortgage the existing property as a buy to let.

Be aware though that most BTL mortgages are limited to 75% Loan to value, and most first residential mortgages tend to be higher than that. Depending on the value and what you owe you might have to put cash into the residential in order to fully reedeem the existing residential mortgage.

[Reece Corcoran]

Thank you all for the advice, it is all very much appreciated.

I am around £20,000 (12%) away from having 25% invested in the house at the price I bought at. The thinking being based on my improvements and market value in the area going up that increase in capital will provide the £20,000 I need for 25% equity.

Now it's all about the saving over the next 3 half years for a new deposit on the next house.

I will keep all of your advice in mind but for the time being whiling I'm saving I will just have to keep reading and listening to build my knowledge.

Thanks,

Reece