We want to buy an investment property. Should we raise the money on our unencumbered home and pay cash or get a Buy To Let mortgage?

Posted on 12 January 2013 by Sue

We have no mortgage on our family and home and are looking to buy and let another property. Should we take out a "buy to let" mortgage or draw down capital from our current home and buy the second property outright?


This is one of those classic 'either / or' questions and there are pro's and con's to both options.

Rasing the funds on your unencumbered main residence will give you access to cheaper pay rates than you will find on buy to let products, as well as flat arrangement fees, rather than the percentages much favoured by buy to let lenders. If this is not going to be your only buy to let then you could also look at raising more money now, keeping it in an offset account, whih means the funds are instantly accessible when you need them.

Also by raisng the money on your existing property it would effectively make you a cash buyer which may improve your buying power.

However the major negative of this, is that the mortgage is secured on your main residence and not the investment property. So in the very unlikely event that you were unable to meet your monthly payment, it is your main residence that would be at risk.  

If you raise the funds on a Buy To Let mortgage, the lender is very much focused on the rental income generated from the property and it must meet their criteria, and some lenders have restrictions on the properties they may lend on, such as those above commercial, newly built flat, or high rise blocks.

If you'd like to explore your optons in more detail, then please let me know and I'll arrange for one of our consultants to contact you.



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