Re-mortgage loan or personal funds for renovation

[ayns]

Hi,

We have a buy to let that has been performing relatively well and with the exception of a few bits here and there we have done nothing to the house since we purchased it 14 years ago. 

We have about 70 worth of equity in the house and the according to the building society we have the ability to draw out 24k based on ltv / rental income. Question is, do I re-mortgage and take the 10k out of the house for refurb via mortgage but obviously incur big interest cost over the remainder of the term (15 years), or do I use my own money or a personal loan (10k would cost me £700 in interest over 5 years) and still have the option to re-mortgage the house in the near future to capitalise on any buying / refurb opportunities that come available in the next 12-24 months .

Obviously trying to map out the property cycle is hard at the moment -  do I just undertake the refurb and accept the increase in rent for a few years and wait for an adjustment in the market to buy? Obviously re-mortgaging when the market is flying (now) is great as you can pull out more money, if the market crashed I maybe couldn't rely on pulling money out to invest elsewhere as obviously  the value of mine would have gone down so I would miss the opportunity.

 

So confusing!!

Any help on the above or a different point of view would be great !

 

Thanks 

[sal_d]

Hi Ayns, that's quite a conundrum!  I think you should first find out what return you would get on the money you borrow to spend on refurbishment.  That's the first thing I would do. BTL has come under a lot of pressure from the Govt in the last 3 years and there aren't any tax advantages to doing a refurbishment. I personally might consider refurbishing if I'm going to sell in order to fetch a higher price; but before I spend all that money I would seek the advice of a valuer and would also look at properties that have been modernised in that area and see how much they're letting/selling for.  In as far as borrowing now to buy a property when/should the market go down, that's difficult to call as you would never know when that would happen.

[ayns]

yeah appreciate thats a tough one to call.

I know by refurbing to a clean , basic but modern standard that it will add 10% value to the property and also enable use to charge an extra 15% in rent so it all checks out. Along with the obvious  benefits of being able to appeal to a better "quality" of tenant and be more picky with the tenants that we rent too. Plus it should hopefully mean that will be the only investment (apart from odd bits) needed between now and the end of the mortgage term.

The price difference for re-mortage vs loan is pretty small in the great scheme of things when you look at it over 7-10 years. 

My thinking is, it seems easier to re-mortgage and use that money to put a deposit down on anything property, whereas using personal debt like a loan isn't looked at favourability but lenders to use as a deposit, however obviously you can use this money for home refurb costs. if i re-mortgage now, doubt I will have enough equity over the next few years to do it again.

 

 

 

[ayns]

by the way first world problems I know , just dont want to make a decision now that means I miss a great opportunity in the near future 

[donnaduncan]

We just did not complicate the situation and just took made repairs, but that the repair did not come out very expensive, we turned to the company https://www.ajmechanicalservices.co.uk/  which provided us with the design and plans for repairs in the shortest possible time. All repairs were made very quickly about 2-3 months, we did not spend much on it and began to hand over to people who began to return us the money that we spent. And we were able to increase the rent for the house and increase our earnings, a year later we have already earned many times more than we spent The secret of success is just to know what is being done and to take and do and not waste time on unnecessary reasoning.

[EvolutionBlogger]

On 9/9/2020 at 12:00 PM, ayns said:

Hi,

We have a buy to let that has been performing relatively well and with the exception of a few bits here and there we have done nothing to the house since we purchased it 14 years ago. 

We have about 70 worth of equity in the house and the according to the building society we have the ability to draw out 24k based on ltv / rental income. Question is, do I re-mortgage and take the 10k out of the house for refurb via mortgage but obviously incur big interest cost over the remainder of the term (15 years), or do I use my own money or a personal loan (10k would cost me £700 in interest over 5 years) and still have the option to re-mortgage the house in the near future to capitalise on any buying / refurb opportunities that come available in the next 12-24 months .

A personal loan would give you more flexibility, as you can use you can then remortgage at a later stage. Also, rates can be very low these days.

The downside is that it might be more difficult to get accepted for credit cards in the future 

[EvolutionBlogger]

On 2/6/2021 at 3:34 PM, donnaduncan said:

We just did not complicate the situation and just took made repairs, but that the repair did not come out very expensive, we turned to the company https://www.ajmechanicalservices.co.uk/  which provided us with the design and plans for repairs in the shortest possible time. All repairs were made very quickly about 2-3 months, we did not spend much on it and began to hand over to people who began to return us the money that we spent. And we were able to increase the rent for the house and increase our earnings, a year later we have already earned many times more than we spent The secret of success is just to know what is being done and to take and do and not waste time on unnecessary reasoning.

Do you have a connection with this company? It's fine if you do, I just think it's fair to disclose that 

[donnaduncan]

18 hours ago, EvolutionBlogger said:

Do you have a connection with this company? It's fine if you do, I just think it's fair to disclose that 

No, this is just my personal experience.

[ayns]

On 2/8/2021 at 5:05 PM, EvolutionBlogger said:

Do you have a connection with this company? It's fine if you do, I just think it's fair to disclose that 

 

On 2/8/2021 at 5:02 PM, EvolutionBlogger said:

A personal loan would give you more flexibility, as you can use you can then remortgage at a later stage. Also, rates can be very low these days.

The downside is that it might be more difficult to get accepted for credit cards in the future 

hi yes this is a bit of an older thread, I opted to borrow the money as got a great apr deal. Plus I dont have any other debt at this stage and I got advice that for credit rating its handy to have something. We refurbed and re-financed so managed to get a good bit of money out of the property as well that we can take forward to another deal 

[EvolutionBlogger]

That sounds like a result!