BASIC GUIDE TO BUY TO LET MORTGAGES
|Thursday, 08 November 2012|
Buy to let is one of the few beneficiaries of a poor economy says leading buy to let website: buytoletmortgages.co.uk .
The golden age of buy to let could be set to return as falling house prices and a slew of attractive mortgage deals tempt investors back into the market, says buy to let website: buytoletmortgages.co.uk.
As the property market struggles and first time buyers find it ever more difficult to raise enough money for a deposit, Council of Mortgage Lenders figures reveal that landlords are purchasing 20 per cent more homes than last year.
The increase in the number of buy-to-let properties bought; comes at a time when residential purchases are expected to fall and those wanting to get on the housing ladder remains at an all-time low.
But the CML says, rather than crowding outӔ first time buyers, buy to let investors are performing a key role within the overall housing market.
Buy to let website: buytoletmortgages.co.uk believes this sector is one of the few beneficiaries of poor economic conditions, being propelled by the combination of a weak economy and cautious lending.
People are concerned about buying and lenders are concerned about lending, resulting in huge demand for rental property, which is forcing yields up, says Lee Grandin of buy to let website: buytoletmortgages.co.uk. ёHowever, we have some way to go before buy to let returns to its 2007 heyday.
While most lenders still demand large deposits and are charging top rates and substantial fees for buy-to-let loans, mortgage conditions have eased over the last 12 months.
100% mortgages are no longer available and to take advantage of the very best mortgage deals you will need a 40% deposit at least.
Below, leading buy to let website: buytoletmortgages.co.uk provides top tips to finding the ideal buy to let mortgage:
Shop around. It might be tempting to wander in off the high street and sign up for the first mortgage deal offered, but you wonҒt get the best rates. Take time to obtain at least five quotes from a specialist mortgage broker, compare the costs and dont forget to read the small print. Remember some of the most attractive deals have the most expensive fees.
Factor in the costs. Mortgage companies have tightened up their lending criteria and many are now insisting on 25% deposits or more. DonҒt be lured in be attractive headline rates, they often come with large arrangement fees. Factor in future interest rate hikes the base rate can֒t remain low forever. Be realistic, will you still be able to afford the mortgage when this happens?
Read the terms and conditions. Many attractive initial rates have early repayment charges. You could be hit hard if you decide to move to another lender in the future.
Dont let the mortgage debt mount up. If you can afford it, pay mortgage fees upfront, adding the lenderҒs fee to your mortgage will mean you end up paying interest on these charges.
Expect the best but prepare for the worst. buytoletmortgages.co.uk says: It is all too easy to get caught up in the excitement and adrenalin of running what is effectively your own business but remember as with all enterprises there is no guarantee of success. What would happen if your property falls into negative equity and you cant afford to re-mortgage? How would you survive financially if your property sits empty for several months? Do you have enough money put aside to act as a financial buffer should the worst happen?
Do your maths. Buying a property and moving a tenant in is only the first step, you will need funds to advertise, manage and maintain your property. DonҒt forget to factor in the fees of a letting agent, typically 10% of the rental income and the cost of landlord insurance, maintenance and emergency repairs. If you decide to manage your property independently, expect to be available to your tenant 24/7.
Residential and buy to let mortgages know the difference. Whilst they are both similar there are several key differences:
Interest rates on buy-to-let mortgages are far higher than those on a residential mortgage.
The sum you can borrow in relation to the value of the property is lower for buy-to-let mortgages.
The maximum you could hope to borrow is around 80% of the property's value, compared to a residential mortgage where you could borrow 90%.
Arrangement fees on buy-to-let mortgages are higher than those on residential mortgages.
Lender֒s assessment of affordability is different. On a residential mortgage, income from employment, pension, benefits and numerous other criteria is used to determine whether you will be able afford the repayment on your mortgage. While on a buy to let mortgage your income is measured as a percentage of the mortgage payment, usually at least 125%.
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