Leverage your equity

Most people who embark on property investment are not cash rich. Usually they have successful careers or may have run a business and have built up substantial equity in their own home, but donât have massive savings.
To get started in property newbie investors often decide to release some of the equity in their own property to put down deposits on others. Property values are rising so the more properties you own, the more value youâve got â and the price rises will go a long way to recovering the equity youâve released. It all makes sense.
Or does it?
If you have more than 75% equity in your property then you could remortgage and get a chunk of cash out ready to buy your next property. Then you have to find that property â and that could take a while. So the cash is in your bank doing nothing and youâre paying interest on a bigger mortgage. Not so sensible, perhaps.
You could negotiate a loan against your property with your bank â but although possible, itâs going to take a while, even if the answer is âyesâ, banks are not known for the speed of their decision making.
Is there a better way?
Effectively you want to be able to operate like a cash-buyer to get the best deals â and to do that you need cash. If you donât have actual cash released from your equity and your bank doesnât allow you the flexibility of fast financing, where does that leave you.
The answer is Bridging Finance.
If youâve taken a sharp intake of breath and are thinking âThatâs very expensiveâ. Just take a moment to consider.
For your main residence, yes, itâs very expensive â and not a strategy Iâd recommend. But if you need money fast to buy a property that a traditional buy-to-let (BTL) lender wouldnât touch and operate like a cash buyer, itâs a very efficient means of getting what you want.
What are the advantages:
Bridging lenders can move fast
Bridging that is based on equity in your main residence isnât dependent on your ability to make repayments so is virtually a certainty
You wonât need to complete any income v. expenditure checks or provide proof of income
Itâs not based on monthly payments
You can borrow enough to cover your purchase and at least some of your refurb costs
Some bridging lenders will lend on the actual value of the property, regardless of how much you actually pay for it
You can get all your money out after youâve refurbed â whether you then sell the property or remortgage it as a BTL.
Is it more expensive than a traditional BTL mortgage? Yes, but is much more flexible and faster to obtain (weâre talking less than a week if necessary).
Is it more expensive than using cash? Yes, but if you donât have actual cash, it gives you the ability to operate like a cash buyer.
If it more expensive than releasing equity from your existing property? That depends on how long you end up paying more interest on the additional mortgage total. If youâre smart and turn properties around quickly, youâll actually end up in a situation where you can put that money back into your home AND have enough to continue building your property investment profitably.
Find out more on the one-day Recycle Your Cash Property Finance Masterclass
You can learn more here:
- Contact Kevin Wright over on his Facebook page.
- Browse the Recycle Your Cash online training library by clicking here.
- Attend an upcoming 1-Day Property Finance Masterclass event - Book in here.