0% LOAN Case Study: Why We Told the Client to PAY IT Off

A 0% loan sounds like the obvious finance to keep, but what if leaving it in place actually means paying more overall? In Episode 125, Gareth Morgan and Mark Watts break down a real client case involving a mixed-use investment property, a £70,000 interest-free local authority loan and a refinance designed to release capital for the client's next investment. In this episode, we discuss: ·       Why a 0% loan can still create a more expensive overall finance structure. ·       How first and second charges can affect the lenders and loan-to-value options available when refinancing. ·       Why the client could potentially borrow more by repaying the £70,000 interest-free loan. ·       How comparing the blended cost of borrowing changed what initially looked like the obvious decision. ·       Why a higher first-charge rate combined with 0% borrowing could still cost more than refinancing the whole amount at a lower rate. ·       How the refinance comparison resulted in around £23,000 more capital being available while reducing the annual interest cost. ·       Why repayment dates, fixed-rate periods and potential early repayment charges also needed to be considered. ·       How restrictions attached to local authority grants and loans can affect future refinancing or sale options. ·       Why understanding the terms, security and exit strategy at the start can prevent problems later. How releasing additional capital created an opportunity-cost consideration for a client looking to continue growing their portfolio. For property investors looking to refinance, release equity or restructure existing borrowing, this episode shows why the cheapest-looking option on paper isn't always the most effective structure for your wider investment plans. If you're considering refinancing an investment property or releasing capital to fund your next purchase, get in touch with the team at Prime Property Finance to discuss your property finance options.