How To Refinance A Buy-To-Let Property Investment? – Q&A Sunday

Every week, I answer questions put to me by my viewers on YouTube. I would love to answer your questions next week on anything about property, whether it be about HMOs; lease option agreements; joint ventures; mortgages; stamp duty or anything else. Please comment on the YouTube page for this video. I will answer as many of the questions that I get on property investment in the next video as I can.

Last week Sam Hawkins asked a great question about refinancing a buy-to-let. Here’s what he said:

When refinancing on the new value of a property, how soon can you release the equity created to be used again? Does this get released straight away on the new buy-to-let mortgage, or do you have to wait a minimum amount of time?

My Reply:

Great question! It depends, there are three different scenarios. If you bought a property with a mortgage: if you buy a house with a residential mortgage; a buy-to-let mortgage or any kind of mortgage, generally speaking the mortgage company are gonna give you that money but they're gonna say you can't pay it back for a minimum of two years, maybe three years. Sometimes one year, but two is quite standard.

So, if you want to refinance it and get a new mortgage once the value has been added, you're gonna have to either wait two years, which is a pain, or you're gonna have to pay early repayment charges which might be a few thousand pounds. That's scenario one.

Scenario two is that you buy the property for cash or you buy it with a bridging loan. The definition of a bridging loan is to bridge the gap between the purchase and the new mortgage. Now if you do that, generally speaking, you're going to have to wait six months because even if you buy a property for cash most lenders will say we'll let you refinance once you've owned it for six months. Owning a property for six months before you refinance it is standard and no problem because it's gonna take you a few months to do the refurb anyway, so that's the usual option.

Scenario number three is that there are some lenders that will let you refinance straight away, such as Kent Reliance and Precise Mortgages so you can buy a property with a bridging loan; cash; angel investment or whatever private finance. You can buy it, you can do it up and you can refinance straight away i.e. like two weeks later. However, there are only a few lenders that will let you do that and your rates might not be as preferable as if you decided to wait six months.

So that’s my reply to Sam. I hope it helped him and I hope it helps some of you guys with the same question. Please do comment with your questions on the page for this week’s video. I am always happy to pass on my knowledge. Also, please do check out last week’s question on the new minimum EPC rating increase due to come in by 2025. It’s something every landlord needs to be aware of.

To see all the other questions that I was asked and my answers to them, check out the full video here.

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