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Applying for Buy to Let Mortgages
(6/11/06) - When I decided to purchase a flat to let out, I was unsure whether
to go direct to a mortgage company or go through an independent financial
adviser (IFA). Because this was my first buy to let property, I opted in the end
to choose an IFA that had been recommended to me. He sought out the best buy to
let mortgages deals for me. Taking my personal circumstances into consideration,
he told me about the types of mortgages I could choose, for example fixed rate
or variable rate, capital repayment or interest only.
In the end, there type of loan I decided on
choosing with help from my IFA was a fixed rate interest-only mortgage. As the
rate would be fixed for five years it meant I could budget my outgoings over
the five years accordingly, rather than worrying about interest rates
increasing and the rent not covering the repayments.
Obtaining the mortgage was relatively
straightforward. And I had a good deposit to put down on their property and
was able therefore to obtain and 80 per cent with a 20 per cent deposit. I
also used my own capital to pay for the fees involved (fees, surveyors fees
etc). I was quite surprised to learn that I could borrow quite a bit of money
using the various income multiples available from various lenders. The amounts
seemed to vary quite widely depending on the type of lender, whether they were
a niche to let lender or a mainstream bank or building society. I also had to
provide quite a bit of personal information on my day-to-day income, such as
payslips and a letter from my accountant detailing my outgoings against my
income. It seemed that the lender wanted to know as much about me as it did
the actual or potential profitability of the Investment in the property.
An interest only mortgage means that for me the
monthly mortgage payments are lower than a capital repayment mortgage, also
that interest payable again for me can be written off against tax as a taxable
charge.
At last after eight weeks of clarifying details
from my application I was finally provided with the mortgage offer allowing me
to proceed to the exchange of contracts on a property I was interested in. I
found the entire process relatively straightforward with regards to finding
out information on comparative rates using the internet.
Re-Mortgage My Existing UK Loan (8/11/06) - During my 4th year of
letting of letting out the home a used to living I decided to remortgage the
buy-to-let property in order to raise additional capital. The market value had
risen by approximately 40 per cent over that time and I was lucky enough to
use this additional equity to raise funds to purchase a second property. The
attitude to risk of the lender was markedly different from when I first got
the original buy-to-let mortgage back in 2001, when the market was still
rising and demand for buy to let property was a highly competitive.
Now that the market has changed and the buyers have become more particular as
prices have peaked, lenders have become increasingly nervous about bad debt from
landlords taking on too much risk from highly priced property. Consequently I
had to provide about twice as much information when I remortgaged as when I
actually mortgaged the property in the first place. And critically the
proportion of money they would let me relative to my income had actually gone
down, even though the general market consensus on income multiples has gone up
on average. I did not think that I was a bad risk and my property has always
been let and I've always had a job and the market near Gatwick has been buoyant
for many many years.
Eventually I did agree on a lower figure for the mortgage amount they would be
prepared to lend m. I learnt a valuable lesson about the differences between the
attitude of lenders towards risk and reward and in particular the bureaucratic
nature of some of the larger building societies (who I was shocked to find out)
didn't have always used computers to store information!
Landlord Research (23/11/06)
Letting agents
- Make sure you use a reputable letting agents that no your target market and
have a clear visibility in and around your property. People often moved to an
area and therefore will view your property from another town. there are
standard contracts with letting agents but be sure to read all the contract
and paid work before you sign - you never know what might be lurking in the
small print.
Decide how much you want to pay your agent by way of fees. Typically the more
fees, the more services they will carry out on your behalf you could opt for a
find his feet only awful management service whereby they range for the
tradesmen to carry out routine or emergency repairs will works on the
property. The alternative is that you have to accept the phone calls from
their attendance and make arrangements yourself as and when the situation
arises - which is not really a problem if you have a network of trusted and
reliable trade people that you can call upon. If you are novice landlord, a
fall managed service may be a more appropriate option.
Knowing your market - It is important that you know
your target market is for your property as this will determine whether you let
your property furnished or unfurnished and also what up if furniture is likely
to be needed… is your target market a family, students or a bachelor pad?...
each group will expect certain things to be provided by you the landlord. When
you come to buy your property think about what amenities your prospective
tenants are likely to want i.e me to train station for commuters, or near to the
shops and schools for families.
Landlord Research - Being a landlord is not as straight forward as
one might think. There is much regulation that a landlord in the UK must
consider and as of April 2007 there is more regulation for a prospective or
existing landlord to be aware of. If new letter agreements are signed with
either new or existing tenants then it may be required to keep tenants deposits
in central schemes. Additionally a recent addition to the legalities surrounding
letter property means that landlords or properties will require licensing. Along
with this regulation the regulation concerning gas safety checks will stand and
landlords must have these carried out and by a corgi registered gas man must
approve and provide a certificate every year at least once within a 12 month
period. If this is not done this is a criminal offence and the landlord will be
liable.
Buy to let mortgages appear to be as popular as ever both in the UK and across
the world particularly for the British Europe, who may be helping to subsidise
their mortgage on a second home abroad by letting it out to third parties at
convenient times of the year. Hungary and the newly joined EU countries are
proving to be attractive with Western Companies and Corporations opening offices
in places such as Budpapest. Apartments near the city centre have already shown
a great deal of interest and since of October 2006 values have increased by as
much as 20%. However, in some cases where only a percentage has been placed as
an initial deposit investors are having to fund more that originally intended as
the currency conversion has meant an increase in price that has to be bourne by
the purchaser; unless of course the purchaser has managed to offset currency
fluctuations by pre-purchasing local currency.
Fist Time Buyers and Mortgages 27(/3/07) - There has to some buyers are
in a difficult position at the present time, in knowing whether to take either
plunge and take their first step on to their property ladder or whether to
wait. There difficulty in knowing whether there housing market is still on its
way up or whether it has started its descent. In many parts of the country
house prices have stabilised and there length of time taken to sell a house
has increased. These houses have been taking longer to sell are the family
homes where perhaps there owners can afford to halt a lot longer to either
obtain the asking price war at least hold on a little longer to get closer to
it.
Whereas properties that first time buyers are interested in generally are
smaller, one or two bedroom houses or flats that appear to be snapped up much
faster, perhaps even as Investment buy to let opportunities that are then push
demand up for these types of properties making it harder for first time buyers
to come in and get there property ladder.
Properties that are new builds are attractive to first time buyers because they
offer an easy way to move in, with often a choice of furnishings and fittings.
Clean and modern, these new houses and apartments and flats offer modern
facilities such as communal gyms, allocated parking spaces and secured entrance
systems. These property types do come at a premium price and when considering
these additional costs are taken as part of an overall mortgage, the first-time
buyer can be paying more for those built in amenities than if he or she simply
obtained a stand-alone membership from a local gym or health club.
