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Releasing Equity With Buy-to-Let Remortgages

Author: michael sterios Author Ranking Silver | Posted: 09-06-2008 | Comments: 0 | Views: 4 | Rating:  (79) Article Popularity - Blue (?) Got a Question? Ask.
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Equity has long been the golden egg of the property investing world. Build up enough equity in your property portfolio and you will never need to work again. Countless celebrity investors and seminar givers have championed the call for us all to buy property and build up equity so we can live the dream of telling our boss where to go and quitting our jobs once and for all.

So how does it work? How does equity help us to achieve our dreams and regain our freedom? After all, equity is not cash and we pay for things with cash. Equity is a paper profit or wealth that exists only on paper. In order to cash in our paper wealth do we not need to sell our buy-to-let properties? This is the question amateur investors and complete novices are most likely to ask.

Selling your investment properties would indeed allow you to release equity and substitute it for cash. If you owned a property that had, for example, a mortgage on it for £200,000 and it was sold for £250,000 then you would walk away with £50,000 in cash minus a few quid for selling costs. The £50,000 of equity in the property, that is the market value minus any loans and mortgages secured against it, would therefore be converted into cold hard cash with which you could buy whatever you want. Cash is, after all, the most welcome medium of exchange in our society.

But what if you don't want to sell your property? If you sell you will of course lose the ability to build up more equity in it in the future. As well as cashing in your chips you will also leave the casino never to return. The answer is buy-to-let remortgages. By refinancing your investment properties you can release some of the equity built up in them while retaining ownership, thereby giving you the opportunity to build up more equity in the future.

Buy-to-let remortgages are essentially refinance products designed for investment properties. They allow investors to refinance their properties by using some of the funds to redeem their existing mortgage while pocketing the remainder. In effect the investor will cash in on the part of the value of the property which represents some of the equity that has built up in it. In the above example the property worth £250,000 has an exiting loan secured against it for £200,000. The owner could, for example, secure a buy-to-let remortgage on it for £220,000. With these funds they could pay off the existing mortgage and pocket the difference of £20,000.

By doing this the investor will give themselves some cash as well as keeping the property. In another few years, if the property market does well, the owner may be able to refinance their mortgage once again and release some more equity. If the investor has several properties which build up equity in this manner and are ripe for buy-to-let remortgages every few years they would probably release enough equity on an ongoing basis to become a professional landlord and therefore have no need for a job.

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Find out if you qualify for Buy-to-Let Remortgages by contacting a mortgage broker at http://www.buytoletmortgagesource.co.uk today
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