Should You Remortgage Your Home For A Cyprus Property For Sale?

This beautiful Mediterranean island is known for its gorgeous climate

, delicious food, fascinating ancient ruins, and beautiful beaches. As it is a popular holiday destination, it is a very good investment for those who are hoping to rent their holiday home out to guests for part of the year while they are not using it. You dont have to be a multi-millionaire to buy a second home, as many people who already have a mortgage on their second home are able to remortgage so that they can purchase a second property in the sunshine to rent out as a holiday home for profit and investment.

If you are thinking of buying a Cyprus property for sale to rent out as a holiday home, is it a good idea to remortgage your primary residence to finance the purchase?

The Advantages

Re-mortgaging your primary residence to help pay for a Cyprus property for sale will be cheaper in a way, because residential interest rates are priced at around 1.25 percent lower than the rates of buy-to-let mortgages. Arrangement fees will also cost approximately 1,000, in comparison to 2 percent of the loan. Many people find that it is a very beneficial arrangement to raise money against their primary residence for this purpose, as long as they meet the criteria or affordability stated for the extra loan and have enough equity in their primary residence to borrow against. They feel that the equity in their home is simply sitting there and could be more valuable invested in a Cyprus property for sale. There are many specialist mortgage lenders who offer competitive deals for this specific purpose.

The Risks

However, although it might be a smart financial move for some to remortgage their primary residence to buy a Cyprus property for sale it also has some risks. There is the possibility that your rental property will experience a slump in rentals where you might not have tenants for a period of time. There is also the risk that a tenant fails to pay the rent. If this situation occurs, you might be in danger of defaulting on your buy to let mortgage when you cannot make the payments.

If this happens, the lender will be able to repossess the rental property, which would be a financial disaster. Since the loan is secured against your primary residence, you could also risk losing your own home.

Buy to Let Insurance

There are some ways that you can protect yourself from this outcome, such as being insured as a landlord. You can take out buy-to-let insurance at the time of arranging this type of mortgage, to cover your repayments during periods of time when the property is not rented out and you cant afford to pay. However, it is important to take the risks into consideration.

There are advantages and disadvantages to this option, and whether or not you finance your Cyprus property for sale with a remortgage of your primary residence depends on your own personal financial planning strategy.

If you are buying a Cyprus property for sale, should you remortgage your first home to pay for it?

by: James P Martin

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