Expert property basics

THE QUESTION

I am currently living in the Middle East, but have two properties in the UK, both are mortgage-free.  The value of each is approximately £250k and both are rented out to long-term tenants.

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I want to start increasing my BTL portfolio size via the Buy, Refurb, Refinance method. Work will be done and managed by experienced family based in the UK.⠀⠀⠀⠀⠀⠀⠀

Would you:

1. Re-mortgage one of those properties to release equity to fund the next property?⠀⠀⠀⠀⠀⠀⠀⠀
2. Take out a separate BTL mortgage (not linked to those properties) to fund the growth and continue with this method?

THE ANSWER

Because you have family based in the UK, the Cross Collateral bridging option mentioned becomes a possibility.

The choice of leveraging the equity in your current property is a choice between 

1. Mortgage at a lower rate, but with continual expense 

and 

1. Bridging at a higher rate, but for a shorter period.

If you feel that you are continually going to be having the money raised invested in one project after another, a mortgage may well be the better option.  If you envisage the cash sitting unused in a bank account for months, while you find the next suitable project, bridging may suit you better.

You would be limited to ex-pat mortgages as you reside outside of the UK but no limitation on bridging lenders.  These are the potential scenarios:

•  Use a mortgage - you could borrow up to 75% on one of your £250k properties. Would £187,500 fully fund the purchase and refurb of your next property?  If so, you need do no more, but if not, you may need to mortgage both properties.
•  Using bridging - you could also borrow up to 75% on one of your £250k properties on a cross collateral basis.  Would £187,500 fully fund the purchase and refurb of your next property? If so, you need do no more but if not, you can put the property you are buying up as additional security to fund 100% of purchase and refurb costs.  When you have done up the new property you can then move to a mortgage to repay the bridging loan and revert your original property back it its unencumbered status.

It is just a case of working out which method most suits your needs. 

Check out this video on Cross Collateral bridging https://www.youtube.com/watch?v=n-j76pQkysg&t=352s

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