Remortgaging or Equity Release

Hello, My wife and I have one property worth £190,000, mortgage free and is rented out at £700 per month. I am looking to release some money from the property to spoil ourselves but are unsure of the best way to do this. I could sell but would have to evict the tenant or remortage/equity release?

The way I am thinking is release enough through interest only payable by the rental income.

Is this a good or bad idea?

Many thanks


Have you got money to burn ? Use any savings to fund your “treats” not pay much more for them with interests going in their current direction. Those little holidays and new telly could cost you dearly.

  • interest rates, sorry

With interest rates whete they are it doesnt make sense to borrow to be a landlord. Your gross rent is £8,400 per annum, if you make modest allowance for maintenance, void periods, management costs/your time you will be lucky to get £7k pa, which is 3.6% of property value. The best 2 year fixed rate with no fees which is normally best for mortgages under 100k is 6.3%. So you would be borrowing at 6.3% to earn 3.6%. If you need the money then consider selling, although not a good time…

Hi, Thank you for your advice and you make it easy to understand. I think at the moment with all the stuff thats happening I am just looking for long security and its after asking the questions I asked that you can get other peoples logic and experience.

Many thanks again.

Hi Steve,

Thank you for your advice, I think its the security I’m looking for but as you rightly say its a holiday so whats the point in doing something I could live to regret. Its always worth asking the question though to get third party advice

Many thanks.

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This calculation missing the fact that your property increase in value ( in normal circumstances). If you sell it then you are removing that opportunity! This way of calculation might be misleading.

It’s not a fact that property will increase in value. The most basic concept for any investment is that past performance isn’t a guide to future performance.

If you look at house prices relative to disposable incomes taken into account current cost of living and current interest rates it’s far more likely that over next few years house prices will fall than rise. The rise in house prices was primarily caused by low interest rates and that is likely to reverse now.

If you think it is sensible to borrow and make a loss on an ongoing basis in the hope prices will rise i would have to disagree.

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If you interpolate using historical house price trends then you will find that it will increase eventually. It highly depends on your data window and your near/far term target. There will be ups and downs. Again based in old data price dips takes 10 years to fully recover (certain regions will bounce back much quicker). I personally would not advise someone to sell if the need money just to spoil themselves.

Past performance isn’t a guide to future performance…

There isn’t enough info to give advice, i just said he should consider selling if he needs the money. The purpose of investing is to make money to do something with it, not just make more for the sake of it. Nothing wrong with spoiling yourself if you have other assets/incomes to cover day to day expenses. We don’t know his circumstances.

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