Published 18 November 2019 · Last reviewed 18 November 2019 · Older article — see current rates
Should you Remortgage your Buy to Let to pay off some debts
Debt consolidation has often gravitated towards mortgages. Attracted by the low interest rates, options to fix, overpay and borrow large amounts it’s easy to see why.
Since the late 90s buy to let debt consolidation mortgages came into their own as if things didn’t work out the cost did not culminate with losing the roof over their heads.
Buy to lets are often taken on an “interest only” basis and are by nature commercial transactions with rental income needing to exceed the monthly mortgage payments.
Consolidating debt onto an “interest only” mortgage is fast becoming a hot and sensitive topic. Many Residential Mortgage Lenders have moved to distance themselves from the combo and this is bleeding into the buy to let area too, accelerated by Mortgage Lenders with product sets in both camps.
So why would they do this when clearly the resulting monthly cost could be set at a lower interest rate? Well here are some of the downsides which should form part of your thought process:
• Mortgages tend to have longer terms than personal credit so you would be borrowing the money over a longer period which adds to the interest costs.
• Personal finance might have early repayment charges.
• Failure to repay the debt may result in the loss of the property.
• Personal debt would become joint if the mortgage is in two names.
So you need to not only concentrate on the positive monthly save but to also to think about carefully and weigh up whether its the right way to go.
For my part, I’ve seen the debt consolidation get lives back on track and relieve the stress of bills draining paydays away. I would need to understand how the debt occurred in the first place and ideally isolate it to a “one off event” such as a wedding, to make sure you are not living beyond your means. I would also be keen to know you’ve tried to agree better terms with your existing providers; sought out professing debt counseling and considered unsecured solutions before deciding this is the best route for you.
Niche Advice can arrange the following depending on your personal circumstances:
• Buy to let remortgages.
• Interest only.
• Rental income solutions.
• No minimum earned income.
• Property income streams only.
• Small to large property portfolios.
• Consolidate store cards; credit cards; hire purchase; catalogue debt; overdrafts; personal loans; loans from family and friends; county court judgements; debt management plans and IVAs.
• Up to 80% of the property value.
• Loans from £25,001 to £2m.
• Property held in personal names; partnerships; limited liability partnerships, limited companies or trusts.
• British residents, Ex Pats or Foreign Nationals.
• Private lets, student lets, HMOs, corporate lets, DSS tenants, socially vulnerable tenants, and family lets.
• Term trackers, 2, 3 and 5 year fixed rates.
• Overpayments, payment break options, and no early repayment charge schemes.
Debt consolidation may be the best option for you but its a conversation piece and we are at the end of the phone.
At Niche Advice we can help with all types of buy to let debt consolidation and talk to you about the merits of having it on an Interest only or Repayment vehicle.
Think carefully before securing other debts against your home
You are consolidating your existing financial commitments, you should, therefore, be aware that whilst this may mean you will make short term savings, over the long term, you may end up paying more. This is because you may be extending the period of the loan. If you are also transferring previously unsecured debts to a mortgage which is secured on your home. The reason you want to consolidate your existing debts is to reduce your monthly outgoings.
Please also be made aware Lenders tend not to look favourably on applicants that have a repeated history of debt consolidation so future finance, for this reason, may be hard to obtain.