S
sultanoflondon
New Member
Hi all,
I was wondering whether this strategy is a good idea to grow a property portfolio or in reality it won't work so well. Please do shed some light on this.
You buy a property for £400k using an interest only BTL two year fixed rate mortgage, with 60% LTV & 40% deposit (deposit is £160k and loan of £240k). This allows you to obtain a low rate on the mortgage, due to the relatively low LTV. Two years later, the property is valued at £440k. You remortgage with another interest only BTL two year fixed rate mortgage, with 60% LTV & 40% deposit (deposit is £176k and loan of £264k). Due to the price rise, you have to now pay £16k into the deposit and the bank releases £24k to you to make up the 60% loan. This means your net bank balance increase is £8k.
With this £8k, you can renovate the property, boost your savings from the rent earned towards another property, or whatever you wish.
I understand one major assumption in this strategy: that property prices are continually rising. Are there any other flaws with this strategy?
Thank you!
I was wondering whether this strategy is a good idea to grow a property portfolio or in reality it won't work so well. Please do shed some light on this.
You buy a property for £400k using an interest only BTL two year fixed rate mortgage, with 60% LTV & 40% deposit (deposit is £160k and loan of £240k). This allows you to obtain a low rate on the mortgage, due to the relatively low LTV. Two years later, the property is valued at £440k. You remortgage with another interest only BTL two year fixed rate mortgage, with 60% LTV & 40% deposit (deposit is £176k and loan of £264k). Due to the price rise, you have to now pay £16k into the deposit and the bank releases £24k to you to make up the 60% loan. This means your net bank balance increase is £8k.
With this £8k, you can renovate the property, boost your savings from the rent earned towards another property, or whatever you wish.
I understand one major assumption in this strategy: that property prices are continually rising. Are there any other flaws with this strategy?
Thank you!