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Save or get a Loan...?


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Hi everyone,

 

I'm in a predicament and could do with some advice...?

 

So, I have 1 BTL mortgage at the moment and am saving hard to get a second. I have about £12000 saved already for my next property and figure I will need another £13000 (£25000 in total) before I can buy my 2nd buy to let property.

 

By my calculations it would take me till November/December 2018 to save up the full amount, so I am contemplating getting a loan for this?

 

I know that getting a loan is generally seen as bad credit, but it seems a logical way of avoiding the 14 month gap in opportunity costs whilst buying at a good time in the property cycle...

 

What do you think... ???

 

(Are there any other factors should I get a loan for a BTL mortgage where using a loan is frowned upon, and may make it things difficult in the future?)

 

Thanks,

 

Neil 

 

 

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Hi Neil

 

Honestly, I wouldn't get that loan personally.

 

December 2018 isn't that far away and so it won't make that much difference to wait until then I would suggest.

 

Remember that if you take a loan for a deposit that you increase your leverage or % debt on the property and these days it is more ideal to have some sort of equity cushion I would suggest...unless you have a 'burning platform' to escape!

 

Using a loan to part-fund a BTL deposit is also frowned upon by the lenders in any case, so it may actually work against you...and you do need to declare the source of your deposit (failing to declare it is a loan could be classed as mortgage fraud).

 

I also wanted to refer you to this podcast episode: http://www.thepropertyvoice.net/soundbite-much-capital-i-need-start/ as it talks about how to raise funds for property in different ways. I do in fact mention using additional borrowing BUT that was in the right context...if you have a clear, short-term exit strategy to settle it off..e.g. a sale or refinance. I would not necessarily recommend this option for a standard, long-term BTL property for reasons stated. There are also some additional links in the show notes that you might find interesting.

 

All the best,

Richard

Richard W J Brown a.k.a. The Property Voice

Property Investment Strategist

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