Can I borrow against a mortgage-free property to buy a property investment?

I

InfoSeeker_

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Hi,


I have 2 properties in my name at the moment.


Property 1 has an outstanding loan of around €150,000. It has a value of around €300,000. I live in this property.

Property 2 has never had a loan in my name, I bought it for cash. It has a value of around €210,000. I rent this property.


If I'm correct, this means I have around €360,000 in equity across the 2 properties (€150,000 + €210,000). I would like to put this equity to use but since I'm 30 years old I do not seem to be eligible for most traditional home equity release options, as they usually have a minimum age requirement of 55-60.


Other than selling, does anyone know what options I might have? I'm thinking if I could somehow borrow or free up say €70,000 of that equity I could use it for a down payment on a buy to let.


Thanks.
 
"equity release" = borrowing money

why do you want to borrow more money?

If you want to increase your income - you can get 14k a year tax free sharing a room in your home.
 
InfoSeeker_ said:
I'm thinking if I could somehow borrow or free up say €70,000 of that equity I could use it for a down payment on a buy to let.
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The idea sounds mad, but one of the non-bank lenders might lend for a new BTL using the existing one as security also, i.e. lend against a 'portfolio'.
BTL rates are currently over 7% with Dilosk and Finance Ireland.
 
Whats your borrowing capacity?

Ignore property 1 your PPR, don't believe you can release equity these days for anything other than home improvements.

If your goal is to create leverage to buy more properties. You could always sell property 2 and use the proceeds as deposits for multiple BTLs depending on your borrowing power, and whether lenders will approve.

e.g. If you can borrow 400k, sell property 2 for 210k. Buy two properties for 250k, putting a 30% deposit down (150k), with mortgages of 350k.
 
Credit unions are going mad to lend money
You did try them?

Home equity doesn't require you to be old... You just need a good income and good credit rating
It's called a top up loan
Younger is better when borrowing
 
As others have highlighted, the salient question isn’t whether you can do this. It’s whether you should do this. And the answer is that you should not. Concentration Risk is a real thing. You should not have all of your wealth invested in a single asset class, i.e. property, nevermind a single asset class in a small island on the outskirts of Europe. And the addition of leverage, i.e. borrowings, into your portfolio just amplifies the risk. You should look at other asset clases, primarily equities, but also bonds.
 
moneymakeover said:
Credit unions are going mad to lend money
You did try them?

Home equity doesn't require you to be old... You just need a good income and good credit rating
It's called a top up loan
Younger is better when borrowing
Click to expand...
Thank you, I will definitively look into Credit Unions and top up loans.
 
DublinHead54 said:
Whats your borrowing capacity?

Ignore property 1 your PPR, don't believe you can release equity these days for anything other than home improvements.

If your goal is to create leverage to buy more properties. You could always sell property 2 and use the proceeds as deposits for multiple BTLs depending on your borrowing power, and whether lenders will approve.

e.g. If you can borrow 400k, sell property 2 for 210k. Buy two properties for 250k, putting a 30% deposit down (150k), with mortgages of 350k.
Click to expand...
Thanks, that's a pity about property 1 but it's good to know.

Yes, so creating/using leverage to buy more properties is what I am looking into. I have approval in principal for 2 buy to let properties but these are based on a standard 30% down payment in cash so I could indeed do as you suggested and sell property 2 and use the funds from selling as 2 downpayents.

What I would really like to do is to keep hold of property 2 and then leverage it to buy property 3, rather than sell it and buy a new property 2, then a property 3.
 
RedOnion said:
The idea sounds mad, but one of the non-bank lenders might lend for a new BTL using the existing one as security also, i.e. lend against a 'portfolio'.
BTL rates are currently over 7% with Dilosk and Finance Ireland.
Click to expand...
Thank you, I might try speak to a broker about this then.
 
This is a very risky strategy and most sensible people would not recommend it over a more diversified and less leveraged approach. Good luck if you go for it. You'll probably need it.
 
ClubMan said:
This is a very risky strategy and most sensible people would not recommend it over a more diversified and less leveraged approach. Good luck if you go for it. You'll probably need it.
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This "risky strategy" is what I'm trying to figure out. I think you are saying that using property 2 to buy property 3 would be risky? But what I'm trying to figure out are concrete options for doing this, that's if there are any options, risk can be accessed fairly then. What type of loan? Which type of lenders? etc.
 
DannyBoyD said:
"equity release" = borrowing money

why do you want to borrow more money?

If you want to increase your income - you can get 14k a year tax free sharing a room in your home.
Click to expand...
It's not that I "want" to borrow more money.

I have property 2 now, it's paid off and produces cash flow. If I don't do anything then in 20 years I will still have property 2 paid off and it will still (hopefully) produce cash flow. All well and good.

But...

If had an option to use somehow use my equity in property 2 now to buy a property 3, and any borrowing involved was on a 20 year term, then in 20 years I could have property 2 and property 3 both paid off and producing cash flow. If there are options to do this then it seems like it would be worth my while to at least find out about them.
 
InfoSeeker_ said:
It's not that I "want" to borrow more money.

I have property 2 now, it's paid off and produces cash flow. If I don't do anything then in 20 years I will still have property 2 paid off and it will still (hopefully) produce cash flow. All well and good.

But...

If had an option to use somehow use my equity in property 2 now to buy a property 3, and any borrowing involved was on a 20 year term, then in 20 years I could have property 2 and property 3 both paid off and producing cash flow. If there are options to do this then it seems like it would be worth my while to at least find out about them.
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Thanks for all the replies, based on what I've heard so far I think the final paragraph in my reply here is what I'm down to trying to find out about. Is this possible? If so, what might be my options in terms of types of loans, lenders etc.
 
InfoSeeker_ said:
Property 2 has never had a loan in my name, I bought it for cash. It has a value of around €210,000. I rent this property.
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It will be impossible to get equity release.

In purely practical terms the best option is to sell property 2 and buy properties 3 and 4 with as much leverage as you can get.

Others have advised on the wisdom of the strategy and so tend to agree.
 
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