Property investment remortgage strategy in a nutshell
The award-winning 3+1 property investment plan book describes how buying three investment properties is an investment strategy that could make you financially independent. It works on the basis that a third of the rental income will pay your mortgages, a third will pay taxes and costs, and the last third will replace your income.
Many investors struggle with how to add to that first residential investment property and build a property portfolio. You’ll need cash to pay the deposit on your next investment property. Where to find that cash is a problem with a simple solution. It’s one that professional property investors use to build property portfolios – sometimes at breakneck speed.
In this article, you’ll learn how you can use buy-to-let remortgages. I’ll also introduce you to Steven, an investor in his mid-thirties who has used a remortgaging strategy to build a 12-property investment portfolio.
When can you use a buy-to-let remortgage?
Buy-to-let remortgages can be used for a variety of reasons. These include:
- Refinancing to take advantage of lower interest rates
- Switching types of loan (e.g. from a variable rate to a fixed rate)
- Paying for the costs of making repairs and renovations
Perhaps the most common use for a buy-to-let remortgage is to release equity from your existing investment properties. This cash becomes the deposit for your next investment property.
How do you find the best remortgage product?
There are plenty of buy-to-let remortgage products on the market. A mistake that some investors make is to base their mortgage choice solely on the interest rate. A lower interest rate doesn’t necessarily mean you’ll pay less for the remortgage. There are likely to be other costs when remortgaging. These may include:
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- Arrangement fees
- Property valuation
- Legal fees
It’s worth shopping around for your buy-to-let remortgage. Recent mortgage deals have been released that could skyrocket investment profits. Some of these are fixed rate deals of five to ten years. With such long-dated deals, you’re allowed to use both rental and personal income when calculating affordability. It means you could borrow more, and grow your property portfolio faster. However, there could be penalties should you wish to repay or remortgage early.
I’d recommend that when you’re searching for a buy-to-let mortgage or remortgage, you should take advantage of the benefits of using a buy-to-let mortgage broker. They know the market inside out and will be able to direct you to the best provider and product for your investment objectives.
Steven’s rapid-build property portfolio
Steven bought his first investment property in early 2009. He’d seen property prices fall because of the Global Financial Crisis, and decided that there was a lot of upside in property UK. When he bought that first buy-to-let property, he hadn’t even reached his thirtieth birthday. The Bank of Mum and Dad helped him with the deposit.
In the years between, he’s used a remortgaging strategy to add properties to his portfolio. He’s been helped by rising property prices. He’s also been helped by his determination to invest in new build apartments near shops, good schools, and with good access to major transport routes.
As the value of his properties increased, he released equity and invested in another. He’s done this consistently throughout the last eight years. He now owns a dozen propertie, and has long since repaid his parents their original loan.
When he remortgages, he releases equity from his existing properties to fund as much as a 40% deposit on a new investment property. His last investment was in two off-plan apartments.
He doesn’t manage the properties himself. He hires a professional investment property management company to do that for him. He prefers to spend his spare time searching for new properties.
He plans to continue to add to his portfolio. He’ll take advantage of property investment opportunities when they arise, and remortgage to fund the deposits he needs. His plan is to retire before he’s 50 years old.
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