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What you need to know about secured loans on buy to let properties
If you have equity tied up in a buy to let property and you are looking to expand your portfolio then there are a couple of different options you can potentially use. There is the traditional secured second charge loan, but there is now also a new ‘top up’ mortgage loan that is available if your financial circumstances permit it.
Why take out a secured loan on a buy to let property?
The main reason you would want to take out a secured loan on a buy to let property would be to use it as a deposit for another buy to let property so that you can grow your portfolio. These secured loans are also known as ‘second charge’ loans as they are the second loan that you will have against that particular property, with your mortgage being your first charge loan. These loans allow you to take out a secured loan of up to 100% of the value of the property, using the property as security for the loan. This is probably the easiest way for you to generate a deposit for your next buy to let property, but make sure that you keep a close eye on your finances and ensure that you are able to meet the repayments on both of the loans as otherwise you will find yourself getting into difficulties.
Things you should think about before you take out a secured loan
If you have a high loan to value ratio on your buy to let property you will need to do some careful financial calculations before you start to consider taking out a loan to provide a deposit for another property. To ensure that you know exactly what your options are in terms of loan amounts and the interest rates you will have to pay on your loan. A secured loans expert found here on the website will glady discuss the options open to you.
The ‘top up’ mortgage option
In addition to the traditional secured loan there is also now the option of taking out a top up mortgage loan. This allows you to borrow up to 20% of the value of your property as long as the combination of your mortgage and your loan does not exceed 85% of the total value of the property. This works in a different way to a standard secured loan in that you don’t actually pay any interest on the loan for the term of the loan, but at the end of the loan you repay the loan plus a relatively complicated calculation relating to the increase in value of the property that you then pay to the lender as a form of interest. This is a very popular option.
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