How to REMORTGAGE to buy a SECOND PROPERTY | Property Investment UK
Summary
TLDRThis 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
🏠 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.
💼 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.
📈 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.
Mindmap
Keywords
💡Re-mortgaging
💡Refinancing
💡Equity
💡Loan to Value (LTV)
💡Rental Coverage
💡Redemption Figure
💡Early Redemption Fees
💡Tax-Free Money
💡Mortgage Broker
💡Solicitor
💡Strategy Session
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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