5 Things to consider when you Remortgage a residential property to buy another
Releasing equity to buy another property using a remortgage is common in the UK but it is not always as straight forward as you may think. I’m a professional Mortgage Broker and in this article I discuss the pitfalls and matters to be aware of when remortgaging a residential property from the perspective of the Mortgage Lender.
Where are you going to live?
Before they allow you to Remortgage a residential The Mortgage Lender will want to know you plan to continue living in the property you are raising money on.
Residential mortgages are a lower risk to them and as such, they will often provide a cheaper interest rate and lend up to a higher level against your property’s value. They are basically safe in the knowledge you will look after the property and pay the bills as it’s your home.
How can a Mortgage Lender check you are telling the truth?
There are a number of measures open to the Mortgage Lender, and these include:
1) Call your Employer
This might sound drastic but is common place, particularly for large Mortgage Lenders. They would run through the basics such as job title, salary etc, but could also ask whether the Employer foresees any future changes, and they would be obliged to disclose any relocation plans or notice period that has been served.
2) Question the property being bought by the proceeds.
The start point might be to request the property sales details. From here they can check if it is area that is typical for rentals. They could challenge why you have selected that location for property investment.
If the property is larger than the one they are lending on, and nearby to where you currently live, they will have greater concerns.
If the proceeds are to help with the deposit rather than buy the property outright they will ask for details of the mortgage that will be supporting the purchase. This may extend to Mortgage Illustrations or Offers.
3) Your property track record
If you have other buy-to-let properties this may make more sense to the Mortgage Lender as part of a Remortgage process.
Also, the current mortgage provider’s name might provide a clue to how the residential property was first bought. Certain brands are known for being buy-to-let providers and if the property was acquired using a buy-to-let mortgage alarm bells might ring – that this too is a bogus transaction.
4) The legal process getting a Remortgage a residential
All Solicitors are obliged to validate the reason for remortgage proceeds. The Mortgage Lender may be more comfortable with large firms whose processes may be more factory-like to these checks, and more cautious of smaller firms that are less well-known to them.The Mortgage Lender could sight the address of the purchase in the Mortgage Offer conditions for greater onerous on the Solicitor accountability, and in extreme cases insist that the purchase takes place on the same day as the remortgage.
5) After Completion
The availability of personal data is much is easier these days including the voters roll, and some Mortgage Lenders will track where the main bills are being sent. They are unlikely to challenge you if these have been set to the purchase address provided you continue to keep up with the repayments. However, they will note this on their records and challenge you should you seek future services.
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