Colli Real Estate

What Equity Mortgage withdrawal (MEW)?

I just read about the growing number of budding Buy to rent empires in newspapers. I came across the term mortgage equity withdrawal and I wondered what that meant exactly, particularly in the context of the buidling of a buy-to-let portfolio. I have a basic knowledge that occurs when the value of increased property and therefore there is a gain for the owner between the price paid and the current value. But how is then converted into real money? And how can it be used as a deposit on additional mortgages? Do not simply accept the bank deposit on the second mortgage that the value of bricks and mortar, or is there a process by which they need cash and if so, how it is done by the owner? Is MEW anythnig have to see with re-mortgage, and if so, what exactly? Sorry if this is really basic Q but I just want a step by step really matters above that I was a little confused! Help would be much appreciated:) Steve

Basically, you're right, the value of your home increases, while at the same time the value of your debt (mortgage) decreases over time as you repay. For example, you start with a house of £ 50,000 and a £ 50,000 loan. After 10 years, you paid £ 10000 and the value of your home has increased by £ 60,000. This means that you have a deficit capital of £ 20,000 (the difference between the amount of your loan and the value of your home, in this case £ 60,000 – £ 40,000). Lenders will allow you, in the most cases, to borrow on this value, that is where the trouble comes from the cold cash. Basically, the lender agrees that you have a £ 40,000 debt outstanding, but also accepts that you 'own' a £ 20,000 share of your home. They lend against your hand. When you take a mortgage bank / company secures the debt, thinking right, if the borrower can not repay the loan, we will take the house and sell it to recover money – known as a repossession). For this reason, when you always the first loan (your original mortgage) the bank / company Dibs on a first home, but only to the value of your debt to them. After the second company, you release your capital through, has Dibs second and take the other £ 20,000, or even if you've borrowed. This is called a "notice of interest". Banks / credit institutions fate this to themselves and notify each other of all equity / loan had been made against a house. Please be aware that I've not provided with the advice in this answer, I simply presented the facts as they are, as it would be illegal for me to advise you to act in any way

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