Buy to Let renovation

Posted on 28 May 2010 by Norman Lynch

I own a bungalow which has a tenant, currently paying £500 p/m rent. I do not have a mortgage on this property. I wish to raise £20,000 to renovate & update the property. Once the work is finished I will sell the property. The shorthold tenancy agreement ends in December of this year. I am 59 years old and other than the rental income I am self employed and my current net profit is only in the region of £7,000. I have no current borrowings or county court judgements. The property is currently worth £140,000 and on completion of renovation will have a value of £175,0000.


On the face of it, you should be able to arrange a mortgage on the rental property. The majority of Lenders have a minimum loan of £25,000, but there are a few who will look at £20,000. The rental you receive on a monthly basis is sufficient to support the loan amount and although low, your self employed income would be enough to cover any rental void that may occur when the current tenancy comes to an end.

However, I am not sure that a mortgage would be the right way to approach this project. The upfront fees on Buy to Let mortgages can be very high and there would be early repayment charges if you were to repay the mortgage within any special rate period. I think you need to consider whether you would be better off taking a personal loan or arranging short term finance.

I recommend that you speak to an experienced independent mortgage broker about your situation.


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