How to REMORTGAGE to buy a SECOND PROPERTY | Property Investment UK

Summary

This video script outlines a strategy for accessing additional funds through property refinancing or remortgaging. It emphasizes that property serves as a wealth reserve, and by securing a new mortgage, one can unlock equity for various purposes, not limited to property purchases. The script clarifies misconceptions about refinancing, explains the importance of loan-to-value ratios and rental coverage, and details the process of remortgaging, including calculating the redemption figure and selecting a lender. It concludes by advising viewers to consider the costs and benefits, and to use the released funds wisely, potentially for further investments.

Takeaways

• 🏠 A property can be a store of wealth that you can access at any time.
• 💼 Refinancing or remortgaging a property involves getting a new mortgage to access the equity in your property.
• 💰 The primary reason for refinancing is to access money, which can be used for any purpose, contrary to a common misconception that it's only for buying another property.
• 📈 Refinancing comes with a cost, typically an interest rate, which needs to be factored into your decision.
• 💵 The money accessed through refinancing is tax-free because it's debt, not income from selling the property.
• 🏦 Loan to value (LTV) ratio is crucial in determining how much money you can access through refinancing, with typical residential properties having a 75% LTV.
• 💲 Rental coverage, usually 125%, is a requirement for most residential mortgages, ensuring the rent is 25% higher than the mortgage payment.
• 🏢 If you own a property outright, refinancing allows you to take out a mortgage up to 75% of its value, with no debt previously.
• 🔍 The 'Redemption figure' is the amount you owe on your current mortgage, which is important to know when considering refinancing.
• ⏱️ The remortgaging process typically takes between 8 to 12 weeks, involving contacting your lender, possibly using a mortgage broker, selecting a solicitor, and completing the legal and financial checks.
• 🌟 Refinancing should be done with a clear purpose in mind, such as investing in another property, rather than just for the sake of having extra cash.

Q & A

What is the primary reason people refinance or remortgage their properties?

The primary reason people refinance or remortgage their properties is to access the money stored in the asset for various purposes, not limited to buying another property.

Is it true that you can only refinance to buy another property?

No, it is not true. You can refinance for various reasons and spend the money on whatever you want.

What is the cost associated with accessing money through refinancing?

The cost associated with refinancing is the interest on the new debt. For example, if the interest rate is 5% on a £50,000 loan, the annual cost would be £2,500, or £216 per month.

Why is the money obtained through refinancing considered tax-free?

The money is considered tax-free because it is taken as debt rather than selling the property. If you were to sell the property, you might incur capital gains tax, but with refinancing, you don't pay any tax on the accessed equity.

What is the concept of 'loan to value' in the context of property financing?

Loan to value (LTV) is a ratio that financial institutions use to determine how much money they are willing to lend against a property. For residential properties, a typical LTV might be 75%, meaning the lender will lend up to 75% of the property's value.

What is 'rental coverage' and why is it important for property financing?

Rental coverage is a measure that ensures the rent collected from a property is sufficient to cover the mortgage payments. It is typically 125%, meaning the rent should be 25% higher than the mortgage payment to ensure affordability.

How does the process of remortgaging work if you already have a mortgage on the property?

If you already have a mortgage, you need to determine the Redemption figure, which is the amount you owe to the bank. When you remortgage, the new mortgage will first pay off the old one, and the difference, if any, will go into your pocket.

What is the typical time frame for the remortgaging process?

Lenders typically quote a time frame of four to six weeks, but in practice, it often takes between 8 to 12 weeks to complete the remortgaging process.

Why is it important to have a clear purpose for the money obtained through remortgaging?

It is important to have a clear purpose for the money obtained through remortgaging to ensure that it is used effectively and not just sitting idle in a bank account, where it could be eroded by inflation.

What services does Aspire Property Group offer to help with property investment?

Aspire Property Group offers a hands-free service to help people build property portfolios and get their money working hard for them, focusing on providing strategy and investment advice.

Outlines

00:00

🏠 Unlocking Equity Through Property Refinancing

The paragraph introduces the concept of leveraging existing property assets to access funds for investment or other purposes. It explains that properties act as a store of wealth and can be accessed through remortgaging or refinancing. The process involves obtaining a new mortgage on the property, which can then be used for various needs, not limited to buying another property. The speaker clarifies a common misconception about refinancing and emphasizes that the funds can be used freely. The cost of this access to funds is the interest paid on the new mortgage, which is tax-free, contrasting with the taxes that would be paid if the property were sold. The importance of understanding loan-to-value ratios and rental coverage is highlighted to assess the feasibility of refinancing. The speaker also discusses the potential increase in property value and how it can be used to release equity.

05:01

💼 Navigating the Refinancing Process

This paragraph delves into the practical steps of the refinancing process, starting with understanding the Redemption figure, which is the outstanding mortgage amount. It advises on planning for potential early redemption fees associated with fixed-term mortgages. The speaker outlines the sequence of events during refinancing, where the new mortgage first pays off the old one, followed by the release of the remaining funds to the homeowner. The paragraph also touches on the role of mortgage brokers and solicitors in the process, emphasizing the need for the solicitor to be on the lender's panel. It describes the lender's due diligence, including credit checks and proof of being a responsible landlord. The speaker shares their experience that the process can take between 8 to 12 weeks and stresses the importance of having a clear purpose for the refinanced funds to avoid idle money eroding through inflation.

10:03

📈 Maximizing Returns Through Strategic Property Investment

The final paragraph transitions from the technical aspects of refinancing to the strategic use of the released funds for property investment. The speaker introduces their business, Aspire Property Group, which offers a hands-free service to help clients build property portfolios and put their money to work. They invite viewers to book a free one-to-one strategy session to discuss their financial goals and how the company can assist them. The speaker also encourages viewers to subscribe to the channel and engage with the content by liking and commenting, emphasizing the value they aim to provide through their videos.

Keywords

💡Re-mortgaging

Re-mortgaging refers to the process of replacing an existing mortgage on a property with a new one, often to access the equity in the property or to secure better terms. In the video, the speaker explains that re-mortgaging allows individuals to tap into the increased value of their property that has been stored as wealth, using it as a means to access funds for various purposes, not limited to purchasing another property.

💡Refinancing

Refinancing is similar to re-mortgaging and involves obtaining a new loan to pay off an existing one, often to secure lower interest rates or to free up cash. The video emphasizes that refinancing is not solely for buying additional property but can be used for any purpose, highlighting its versatility in accessing capital stored in one's property.

💡Equity

Equity in the context of the video refers to the difference between the market value of a property and the outstanding mortgage on it. The speaker discusses how the increase in a property's value over time creates equity, which can be 'unlocked' through re-mortgaging or refinancing, providing the owner with cash that can be used for investment or other purposes.

💡Loan to Value (LTV)

Loan to Value is a ratio that financial institutions use to determine the amount of money they are willing to lend against a property. It is calculated as a percentage of the property's value. The video explains that a typical LTV for residential properties is 75%, meaning a lender would provide a loan for 75% of the property's assessed value.

💡Rental Coverage

Rental coverage is a financial metric used to determine if the rental income from a property is sufficient to cover the mortgage payments and other expenses. The video mentions that lenders often require a rental coverage ratio of 125%, ensuring that the rent collected is 25% more than the mortgage payment, reducing the risk of default.

💡Redemption Figure

The redemption figure is the amount currently owed on a mortgage. In the video, the speaker advises viewers to obtain their redemption figure from their bank, as this is crucial information when considering refinancing. It represents the debt that will be replaced by the new mortgage, and the difference between the new loan amount and this figure will determine how much cash the homeowner receives.

💡Early Redemption Fees

Early Redemption Fees are penalties charged by a lender if a borrower pays off a mortgage before the end of a fixed term. The video script warns about these fees, suggesting that viewers should be aware of them when considering refinancing, especially if they are in the middle of a fixed-rate mortgage term.

💡Tax-Free Money

The term 'tax-free money' in the video refers to the money obtained through refinancing or re-mortgaging that is not subject to income tax, as opposed to capital gains that might be incurred if the property were sold. The speaker argues that while there is a cost to borrowing, not having to pay tax on the accessed equity can be a significant financial advantage.

💡Mortgage Broker

A mortgage broker is a professional who assists in finding and securing mortgage loans. The video suggests that if a homeowner is not satisfied with the refinancing options offered by their current lender, they can engage a mortgage broker to explore other options and lenders, emphasizing the broker's role in navigating the refinancing process.

💡Solicitor

In the context of the video, a solicitor is a legal professional who represents clients in property transactions, including refinancing. The speaker highlights the importance of choosing a solicitor who is on the lender's panel to ensure a smooth legal process. This involves preparing and reviewing legal documents and ensuring all legal requirements are met for the refinancing.

💡Strategy Session

A strategy session, as mentioned in the video, is a meeting between the speaker's team and potential clients to discuss their financial goals and how to achieve them through property investment. The video offers a free one-to-one strategy session as part of the services provided by Aspire Property Group, aiming to help clients leverage their property equity effectively.

Highlights

Accessing stored wealth in properties through re-mortgaging or refinancing.

Re-mortgaging involves getting a new mortgage on a property to access funds.

Refinancing is not limited to buying another property; it can be used for any purpose.

The cost of refinancing includes interest rates but provides tax-free money.

Refinancing allows access to money without paying capital gains tax on property sales.

Loan to value ratio is crucial for assessing how much can be borrowed against a property.

Rental coverage is a factor for lenders, requiring rent to be 125% of the mortgage payment.

The importance of considering fees when assessing the value of refinancing.

How to calculate the potential equity release from refinancing a property.

The process of refinancing a property that is mortgage-free involves getting a new mortgage.

Understanding the Redemption figure, which is the outstanding mortgage amount.

The impact of early redemption fees on the decision to refinance.

The steps involved in the remortgaging process, including contacting the lender and choosing a solicitor.

The importance of selecting a solicitor who is on the lender's panel.

Lender's checks include credit, court judgments, and proof of being a good landlord.

The typical time frame for the remortgaging process is 4 to 6 weeks, but can extend to 8-12 weeks.

The necessity of having a clear purpose for refinancing to avoid eroding money through inflation.

Aspire Property Group offers a hands-free service to help investors build portfolios and utilize their money effectively.

Booking a one-to-one strategy session with Aspire Property Group for personalized portfolio building advice.

Transcripts

so you want to get more money to invest

but you don't have it in your account

well I'm going to show you how you can

get it from your already existing

properties

[Music]

so a property in itself is a store of

wealth and so you have to think

logically you are storing wealth in the

asset that you can access at any point

in time now how do we access this

re-mortgaging or refinancing a property

so the way that we do this is by getting

a new mortgage on the property so you

will hear things like refinancing

remortgaging and a couple of other ways

but really it's getting a mortgage on

the property which is a dare and that is

paid back to you in a majority of

situations so why do people refinance or

remortgage anyway well the number one

reason is obviously getting access to

the money and you can spend this on

whatever you want I actually read a

comment the other day like oh you can

only refinance if you're using it to buy

another property

absolutely not true by the way I just

want to make that very clear and if that

was you coming on it

only comment on things you know about

that's absolutely not true all right so

refinancing is simply getting a new debt

and I'll go through an example of this

in a moment and you can use that for

whatever you want now it's important to

know that obviously that debt comes with

a cost so for example if interest rates

are five percent and I get 50 000 pounds

out I need to be paying five percent on

that which is two and a half thousand

spread over the year so

216 pounds a month all right so I need

to be aware of that however is also tax

free money now people seem to hate it

when I say that apparently but the point

of it is is that because you're assuming

it as debt instead of taking it out and

selling the property you don't pay any

tax on that now you do pay a cost to

that but if you took out fifty thousand

pounds and you're a high income tax

earner then 20 000 pounds of that would

go to the tax man so think about it

that's going to be the equivalent of 16

years worth of Interest okay because

you're not paying any tax on that now a

majority of you if you are anything like

me end up using that to buy another buy

to let property but you can use it for

whatever you want so how do you assess

your property and this is really

important in line with something called

loan to value now for boring vanilla

vital at properties you're likely to get

a 75 loan to value what that means is

whatever the surveyor that goes out

determines the value of your property

the bank or the lender will go hey

here's 75 of that as long as it all

Stacks up and you do need to make sure

it's got something called rental

coverage now when you're in commercial

lending you don't need to worry about

that but most of us are going to be in

that stage what rental coverage is is

usually 125 anything of what the hell

does that mean what it means is the rent

needs to be 25 above what the mortgage

payment is going to be for example if

the mortgage payment is going to be a

thousand a month it needs to be able to

achieve

1250 in order for them to give you that

money really important to understand as

long as that box is ticks and you're all

credit worthy and tickle the boxes for

them they'll give you 75 of that so if

it's a 200 000 pound property they will

give you a hundred and fifty thousand

why is this so important well you need

to think of yourself of when it's even

worthwhile to access this money because

if it's only five grand well you're

probably going to pay a few thousand

pounds in fees however let's say you

bought the property three years ago for

150 Grand well if you bought them in the

areas that my investors invest in and I

invest in that would be close to a

hundred and ninety thousand now so

you've got an additional 40 Grand in

equity so we'd look at releasing that

money so how does it work if you've got

it cash and how does it work if you've

already got a mortgage on it so let's

assume you own the property in cash what

a fortunate position we are in right so

if I own this in 200 000 pounds property

and it's all Cash There's No debt on it

well if I raised a mortgage on it 75 a

hundred and fifty thousand would go in

my pocket no questions asked and what

they do is they put a charge against the

property it's really important this you

you know you hear people go you don't

own the property the bank does that's

just not true at all you do own the

property but they have security over the

property and what that means is they put

a first charge over the property what

this means is if you stop paying them

they can take the property and force you

to sell it okay so only ever get a

mortgage if you intend to pay it

fairly obvious right so if you've got

that it goes in now here's the important

part of where people get really confused

on the figures so just try and go along

with me if you've already got a mortgage

on the property you need to write down

and get something called the Redemption

figure the Redemption figure is how much

you owe to the bank or the lender how

you get this by the way is you should

know it already with a quick chat you

can log in most um Banks and that have a

portal but if not you just call the bank

and say hey can I get a Redemption

figure as of this date so if you're

thinking about refinancing I would get

the Redemption figure for three months

from now maybe four months from now so

you understand that's really important

by the way because you might have

something called early Redemption fees

so if you've taken out a five-year fixed

mortgage and you want to refinance on

year two well you're gonna have early

Redemption fees whereas if you've got a

two-year mortgage or a variable rate

mortgage you can usually refinance

without early Redemption fees really

important for example if I get my

Redemption figure back and they say

you've got a hundred and ten thousand

pound mortgage on this property that's

really important because when I

refinance at 150 000 let's not take

account of any fees or anything like

that the first thing that's going to

happen is it will pay off your old

mortgage because there's a new mortgage

on this so 110 000 gets paid back to the

other mortgage company and then the 40

000 goes into your pocket so it's really

important to understand the new debt

that's going to replace the old debt and

then therefore how much money is going

to be left in your pocket so what's the

process of a remortgage well the first

thing you need to do is get in touch

with your current lender they might give

you a special variable rate which is a

bit of a discount variable rate because

they want to retain your business if

you're not happy with what they are

looking for then what you would do is

engage with maybe a mortgage broker if

you need to most of the time I would per

personally and they will show you your

options out there so that you can decide

what it is you want to achieve with this

and what lender you want to go to once

you've picked your lender you then need

to pick a solicitor now if you've got a

trusted solicitor already that's fine

but what you need to do is talk to them

and make sure they are on the lender's

panel this is really important so each

lender has a panel of solicitors that

they are happy working on with so what

they would have done is a series of

checks on them getting on a lenders

panel isn't that difficult for most

people by the way so if they're not and

you really want to use your solicitor

you can instruct them to get on the

panel if not pick a solicitor or go to

London ask for a recommendation of some

solicitors that are on their panel what

they will then do is start the legal

process and they will represent you and

the lender on this just getting

everything together very simple process

the lender if it's the same lender they

probably won't send out a surveyor to

value the property if it's a new lender

they probably will so they'll send out a

value on the property to assess the new

value and then they'll do your checks on

you so they'll do credit checks to make

sure you've got the court County

judgments they'll make sure that you're

earning money and if you've got an

existing portfolio what they'll do is

they'll want to see proof that you are a

good landlord and what this means is

have you actually been renting out the

property have you been collecting the

rent have you been paying your mortgage

on time and then at that point they will

release it the typical time frame that

they will quote you is four to six weeks

it will take between 8 and 12 weeks in

my experience so it's a very simple

process you need to go through and I

strongly recommend it if you're looking

to utilize the money now this is the key

I see a lot of people remortgaging and

refinancing with no purpose of the money

there's no point doing that at all

because if all it's going to do is sit

in your bank account and erode through

inflation then why would you do that you

better having the Extra Protection

keeping it in cash however if you are

sat there and you're looking to invest

in another property you're going through

that remortgage process now starting the

remortgage or indeed you've got 100K

plus sat in your bank well this is where

we can help you so my main business is

Aspire Property Group and what I help

people do is build portfolios and get

your money working hard for you so you

can focus working hard on your money so

this is a complete hands-free service

I'm not going to go through the full

details now but what you can do is book

in a one-to-one strategy session where

we're going to go through where you're

at now where you want to get to and if

we can help you on that Journey so the

way you could get access to that for now

is completely free you can put APG in

the comments or I'll click the link I'll

put it in the description and the

comments and pin it to the top so click

on that fill in your details one of my

team will be in touch over the next day

or two where we can talk with each other

make sure we're all right fit and then

book you in for that free one-to-one

strategy session let me know what you

thought of this video in the comments

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