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Remortgaging a Cash only purchase. Is this a bad deal?


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Hey proprty hubbers.

Having done a few of the university courses with PH university, i have realised the importance of having a mortgage on a BTL.

My wife bought a property in cash for £47,000 7 years ago in Glasgow. Last year we transfered it into a limited company. Its probably worth around £55,000 now.

Rental income is around £600 a month, service charges are around £100. So it leaves us with around £500 a month (I know...we were very lucky to get it but it was strictly cash only)

I pressed my mortgage advisor and he said he could get me the following deal on this ex high rise, council house. I am assuming the valuation is £55,000:

  • max LTV 55% (gross loan) [so im borrowing £30,250]
  • Variable rate 6.49% or fixed rate 7.49% [not sure what one is better to go for]
  • Both have a 2.5% Arrangement fee [of the amount borrowed or the total valuation]
  • Solicitor fees 0.6% 
  • Title fee £100
  • Survey fee - £240 (subject to change) 

I have added in a screenshot of what the interest only charges will be and its around £188 a month assuming 7.49%. I am trying to figure out if this deal is a decent deal (i know its a terrible % rate but isnt it better than me locking up £55k in cash in a property?) I assume i can afford it because i have a spare £188 a month i can py towards a mortgage, as i am currently getting around £500 a month.

My plan is rapid growth and i really want to buy another property, as now is the time to buy. I would love, if i could free up 30k to go and buy another 100k BTL property within a month or so.....perhaps in Liverpool or Manchester...

 

Lastly, has anyone else managed to get a better LTV on a similar property (High rise, perhaps cladding, balcony, and a mixture of council and ex council homes in the block)

 

Thanks in advance for your help!!

 

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Hello, can't comment on how competitive that mortgage deal is, as frankly it sounds awfully high for such a low LTV product, though with the restrictions on the points you've mentioned I can understand that it might limit your pool of lenders and maybe this provider is aware of this and can get away with charging these rates. I'd personally not be happy with such a high rate whilst in such a low interest rate environment, but the yeild still looks solid  enough if you were to go ahead. 

Just throwing in another option here, but is there any reason you really want to keep that specific property? Whilst it might not be quick to sell (as again I'd imagine it will be cash only for the majority of cases based on what you've detailed above). If you were able to sell and pull the full 55k out (minus costs etc) you'd be in a position where you could use the money as deposit to buy another two more standard properties where you'd have a lot more flexibility going forward (and much better interest rates) 

Whilst a 6k income on a 47k purchase is impressive on the face of it, after refinancing on the above deal you'd still be leaving 25k tied up (assuming the val is now 55k) for 312pm income, which although is good, you could achieve similar ball park figures on many other standard properties where you'd have more flexibility of refinancing/selling down the line etc

Cheers 

Matt 

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