Borrowers have never had it so good, and with interest rates at their lowest level for decades there are opportunities to profit from taking out a larger mortgage than you might otherwise consider.

As the percentage increase on the value of your property is based on its market price, not the level of your mortgage, any increase in value will be higher in cash terms when applied to a more expensive property. It is therefore generally worth using a higher mortgage in order to purchase a better property if you can. This is known as gearing.

For example, if you sell your house after 4 years and during that time prices have risen by say 30%. A 30% increase on a £200,000 property is £15,000 more than a 30% increase on a £150,000 property. Yet your additional mortgage (at say 5%) is likely to have cost you just £10,000 during that time, resulting in a profit of £5000 as well as the privilege of living in a much finer home during the period.

Effectively you are using the bank’s money to support your tax-free property investment. Clearly you should be able to afford the repayments, remembering that with interest rates so low, they are more likely to up than down!

If of course, you were to use the additional borrowing to purchase a property with an extra room that could be let out, any potential increase in interest rates during the period could be covered.

Food for thought!

If you wish to discuss the concept in more detail, please feel free to contact us on Woking 01483 772000 and we’ll put you in touch with an expert.