Buy to Let / Offset Mortgages

Planning your pension: Offset Mortgages

Many people like the idea of creating a property portfolio to fund their retirement.

Not everybody is a fan of pension plans, but they do understand the property, I know that over the past 20 or 30 years it has been a sound long term investment despite the peaks and troughs.

In this case study, we look at one way we helped a client take her first step on the road to being a Landlord.

Remortgaging for a Buy to Let Mortgage in Doncaster

Robin is a self-employed mum of two, who is a Director of two small businesses in Doncaster. She and her partner had a substantial amount of equity in their home and were interested in raising some capital to buy a low value buy to let property, possibly at auction.

Robin felt she could get some bargains at auctions, but she never had enough money to attend and be a cash buyer.

She had looked into Remortgaging her house in Doncaster for this purpose before but had been told it wasn’t possible unless they could provide an address for the onward property they wanted to purchase – the proverbial “chicken and egg” scenario.

Robin also mentioned that once or twice a year, she received a dividend in the region of £3000 from one of the companies she was a sleeping partner in, and she has been prone to wasting some of that cash when it arrived, perhaps unexpectedly.

Surplus funds allowing you to gain lower rates of interest

I could tell that Robin was a very busy person but also an astute businesswoman. The dividends she received could be put to better use as she never had it earmarked for anything specific.

I recommended an offset Remortgage in Doncaster for Robin and her partner secured on their home.

I found a Lender who was happy to release funds on completion to be assigned to a future buy to let purchase without insisting on a specific property.

Robin simply deposited the additional funds into the offset savings account that comes as part of the mortgage, and these monies simply sit there until she needs them.

The offset savings accounts do not attract interest but instead is offset against the mortgage balance.

To clarify, Robin had £85,000 surplus funds from a total remortgage of £215,000. While the money is in the savings account, Robin only pays mortgage interest on the £130,000 difference between the two figures.

The £85,000 is on instant access and was available whenever she needed it

It is choosing the right property and the right amount of investments

Three months after completion, Robin identified a suitable property that was in a state of disrepair. It was probably not mortgageable itself, but of course, Robin had access to liquid funds to buy the house outright.

Robin secured the property at a knock-down price of £55,000, but this amount needed to rise to a total of £70,000 to fund legal costs and a refurbishment program of works.

A further nine months went by, and with the works all done, Robin had no trouble finding a tenant. The house was now worth £90,000, and we raised a remortgage of £67,500 against it to fund the purchase of property number two.

The successful outcome of a well-constructed investment property portfolio

Robin has no intention of becoming a full-time Landlord, but she can now see a way forward to owning three or maybe even four properties in the future to fund her planned retirement lifestyle.

She loves the flexibility that her offset mortgage brings, and while she still ‘squander’ some of her dividend, which is her right to do. Without fail, half of it at least is deposited back into her offset savings account, her money working “for her” to reduce the total amount of interest repayable.

If you are interested in offset mortgages or building your investment property portfolio, please get in touch, and our Mortgage Advisors in Doncaster will be happy to assist you.

Remortgage to Consolidate Debt Case Study

Debt Consolidation Mortgage Advice in Doncaster

What is debt consilidation?

Debt Consolidation Exampled | MoneymanTV

To a greater or lesser extent, at some point in there lives, a lot of people will find themselves in debt. For whatever reasons, it can quickly turn into a dire situation. When you find yourself in these circumstances and have paid all your bills off at the beginning of the month, it can often mean there isn’t much disposable income left.

One option that some applicants may have the option of is a debt consolidation remortgage in Doncaster. Here we take a look at one of these in practice, via a case study.

Keeping within your limits will help in the long term.

Nicole was a divorcee who was living by herself, with her children having left home to start their lives. Her debt had started to gradually build it’s way up because of her legal bills after divorce. This grew over the years, leaving her with little options outside of living from one income with unreliable maintenance from her ex-partner. 

Some time after, one of her younger daughters became pregnant. As any loving parent would, she wanted to try her best to help her out financially, although it could be strongly argued that she couldn’t afford to do so.

Luckily by this point, Nicole had already paid her mortgage off years prior, so she had the property there as an asset to potentially borrow against. She was bringing home around £1,100 per month, and her credit commitments were taking up the majority of this income.

She always kept up her payments on credit commitments, but she had no emergency fund to rely on. Whilst Nicole’s credit score wasn’t as bad as it could’ve been, she was no longer able to obtain new 0% credit cards to transfer her balances.

One of Nicole’s friend recommended that she speak with me to figure out if there was anyway that we could help to improve the quality of her finances, and by proxy, her life.

A personal loan isn’t always the easiest option.

When I met Nicole, her mood was low and she wasn’t particularly motivated. She had cut back on all of her luxury spending, and it was abundantly clear that she was desperate to take ownership of her financial situation before it got any further out of hand.

We explored the possibility of Nicole taking out a personal loan, but her debts had crawled too high for that to work. Nicole had no family members who she could turn to for help and she wasn’t able to downsize. After much discussion, we agreed the right way forward would be to take out a remortgage on her house to pay off the debts and reduce her outgoings.

Reliability – A vital trait for Lenders.

After some searching, we managed to find a lender that was a right fit for Nicole’s requirements. It has to be said though, that because of her low income, it was rather difficult to find a lender who was willing to lend her enough. We managed to help her obtain an Agreement in Principle, but regrettably, when we submitted the formal mortgage application, it was declined.

The case was declined because the assigned Underwriter who was assessing their situation felt that Nicole had been using cards as a means of paying off her other cards and not then closing down the cards in question.

When she had transferred balances, there was considered to be a high risk that this would keep occuring and she would rack up debts again.

Nicole was understandably devastated. She understood the concerns, but to her, she had accepted that she had a problem, and by getting in contact with us, she’d taken the best step forward to fixing her situation. To her, their risk was minimal – the loan to value was under 40%, she was reliable with her monthly payments, and if the remortgage was successful, she could have ended up an amazing £500pm better off.

All of the above may have been true, but unfortunately clients don’t always appreciate that repossessing a proper is the last thing a lender ever wants to do. It reflects poorly on the numbers they are required to report on a yearly basis. In the event of this happening, they have a major stress in having to secure the property, insuring it, marketing it, selling it, and paying the equity surplus (if any) back to previous owner of the property.

Because of these reasons, if there is reasonable doubt, then an Underwriter has the discretion to decline an application, even if the case technically falls within their published lending criteria.

Being declined doesn’t mean failure, you can improve for next time.

We are proud of our hard work and always aim to get our recommendation right the first time, though this time it didn’t go as we’d hoped. This was due to the Underwriter’s adverse comments at the full application stage. That being said, we still knew that this remortgage wasn’t as risky as the mortgage lender had said it was, and that with the right lender on side, it would be the right path to take.

Nicole perhaps felt like she wanted to give up, but still we went back to the planning table and began the search for a new mortgage lender. Sure enough, we found one who fit what we needed. Utilising the information we had gathered from the previous mortgage lender, we were able to provide better supporting comments this time around and thankfully, our efforts were met with great success.

We’ll keep you on track after you’re back on track.

Nicole didn’t take this step lightly. In doing this, she has secured debt that was previously unsecured, though she may end up paying back more interest overall, depending on how quickly she can get the mortgage paid off.

On a positive note though, in the short term, this has worked out a treat for Nicole. She now has had the burden of debt firmly relieved from her shoulders, she has an improved credit score to her name, and she now has the ability to start saving a bit more money per month.

The savings we were able to help her make amounted to over 50% of her net take-home pay monthly, and it has drastically changed her life. Upon the completion of the remortgage, Nicole made sure that she cut up all of her credit cards except one to use for emergencies only and nothing else. After hard work and perseverance, her financial life is finally back on track.

If you are like Nicole and are struggling to deal with debt, but are a Homeowner with equity, please do get in touch to discuss your options, ideally before the situation gets too far out of hand. We are available from early until late, all throughout the week, and can be contacted either by telephone, email or by using our online appointment booking feature.

The earlier you take back control of your finances the better your personal and financial life will be. We offer Debt Consolidation Remortgage Advice in Doncaster & all surrounding areas.

Doncastermoneyman.com & Doncastermoneyman are trading styles of UK Moneyman Limited, which is authorised and regulated by the Financial Conduct Authority.
UK Moneyman Limited is Registered in England, No. 6789312 | Registered Address: 10 Consort Court, Hull, HU9 1PU.

Authorised and Regulated by the Financial Conduct Authority.
We are entered on the Financial Services Register No. 627742 at www.register.fca.org.uk

The information contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK.
Should you have cause to complain and you are not satisfied with our response to your complaint, you may be able to refer it
to the Financial Ombudsman Service, which can be contacted as follows

The Financial Ombudsman Service, Exchange Tower, London, E14 9SR
www.financial-ombudsman.org.uk

© 2022 Doncastermoneyman

Doncastermoneyman, 3 Cavendish Court, South Parade, Doncaster, DN1 2DJ.

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