Unencumbered Home to Purchase a Buy-to-Let Property

With a property worth £1.6 million that is fully owned (no mortgage on it), you have significant equity available to explore various financing options to raise funds for purchasing another property for buy-to-rent purposes. 

Unencumbered Property 

This basically means you have paid off the mortgage and you own the property outright. In order to be able to raise additional funds from this, we would need to understand your income, other liabilities, and general credit history. If we were to use an example of someone with a stable income, little liabilities and general good credit history, there should be no problem in raising a mortgage on your existing home, to purchase a new buy-to-let. 

Here are some potential options to consider: 

1. Remortgaging or equity release: 
   • You can remortgage your existing property to release equity. Lenders may offer you a mortgage based on the property's value, allowing you to borrow a portion of its equity
   • The amount you can borrow will depend on factors such as your income, creditworthiness, and the lender's criteria
   • Another option is equity release, where you borrow against the value of your property without making monthly repayments. Instead, the loan is repaid, along with interest, when the property is sold in the future
2.  Buy-to-Let mortgage:
   • Once you release equity from your existing property, you can use the funds as a deposit to purchase another property for buy-to-let purposes
   • You can apply for a buy-to-let mortgage on the new property, with the rental income from the property being used to support the mortgage application
   • Lenders will assess factors such as the rental income potential, your financial stability, and the property's value when determining the terms of the buy-to-let mortgage
3.  Commercial mortgage:
   • ​​​​​​​If the property you intend to purchase for buy-to-let purposes is commercial or non-residential, you may consider applying for a commercial mortgage
   • Commercial mortgages are designed for properties used for business purposes, including rental properties, commercial buildings, or mixed-use properties.
   • Lenders will evaluate the rental income potential, property value, and your ability to repay the loan when considering a commercial mortgage application
4. Bridging finance:
   • ​​​​​​​Bridging finance is a short-term loan option that can provide quick access to funds for property purchases
   • It can be used as interim financing until longer-term financing, such as a mortgage, is arranged
   • Bridging finance typically has higher interest rates and shorter repayment terms, so it's essential to have a clear exit strategy for repaying the loan, such as selling the property or refinancing with a mortgage
5.  Portfolio financing:
   • ​​​​​​​If you own multiple properties, some lenders offer portfolio financing options where they consider the overall value and rental income of your property portfolio when assessing your borrowing capacity
   • Portfolio financing can be beneficial for investors with multiple properties, as it allows for greater flexibility in leveraging existing assets to finance new acquisitions
   • Before proceeding with any financing option, it's crucial to carefully consider the terms, costs, and risks involved

Consult with a financial advisor or mortgage broker like John Charcol who specializes in property finance to explore the best options tailored to your circumstances and investment goals. We can help you navigate the process, compare available financing options, and secure the most suitable funding for your buy-to-rent property purchase. 

Please get in contact with us on 0330 433 2927 or via our enquiry form here.