Landlords who have three or more mortgages for buy-to-let should consider merging these mortgages to create one portfolio mortgage. Some property experts predict that the rental market will grow, with a shift to renting over buying property. Both experienced and new landlords need to look at ways to keep a profitable buy-to-let business while expanding their property portfolio. Re-mortgaging the buy to let property they already own will allow them to raise more capital and release equity.
Low interest rates can help maximize rental profit. It makes sense to use equity to make a deposit in order to expand your property portfolio. The Buy to Let Mortgage Interest Relief allows you to deduct all mortgage interest charges from your rental income. You cannot live in the same property that you claim mortgage interest tax relief.
Although re-mortgaging buy to let properties is a popular strategy, it can be very costly and one of the most expensive ways to raise finance from equity held in properties. The fees associated with buy-to-let mortgages can be very high. Landlords could also face an early repayment fee if they need to remortgage before the initial tie-in period ends.
These are the benefits of combining your mortgages to create a portfolio mortgage.
1. It’s simple: one account, one payment and one interest rate, regardless of how many properties you own.
2. Without the need to remortgage, you can transfer equity to re-finance additional properties. This allows you to avoid paying a lot of fees.
3. A limited company can take out a buy-to-let portfolio mortgage. A portfolio owned by a limited company is subject to corporation tax, which is lower than income tax.
4. You can use the combined features of the portfolio loan to withdraw equity from your portfolio mortgage account and then pay your residential mortgage. This will increase your portfolio mortgage debt and the interest charges, while reducing the residential mortgage.