101: Things we DO like to talk about.
Buy to Lets.
The Buy to let market can be a little intimidating, not many people know all that much about it, but in the currently depressed housing market a buy to let can be picked up quite cheaply.
With first time buyers finding it difficult to get on the mortgage ladder and buy their first home there is an ever increasing need for rented housing.
Locally in Newark and Nottingham there is very strong demand for rental properties in and around employment centres, with strong rents from incoming migrant workers unable to get on the mortgage ladder, with little or no deposit.
Buy to Let mortgages come in two basic flavours:
The first is the more difficult to get hold of, where the lender basis the loan not on the property but on the person borrowing. These are not the mainstream of buy to lets, but are often the best deals.
The much more common is the standard buy to let mortgage, where the mortgage is based on the properties ability to wash its own face, or rather that the rental is sufficient to pay the mortgage plus a small amount. Usually the calculation used by the lenders is 125%, in other words the rental assed by the valuer must be at least 125% of the mortgage payment based on a an interest only loan.
After this basic criteria there really is not much more to it, there are nuances for each lender, for example, some lenders will not accept any applications from first time landlords, whereas others have special deals for such. The Maximum number of properties available under one particular lender can vary widely with some lenders only allowing 3 properties to some allowing any number up to a total value of £3,000,000 or more.
There are a few other things to consider, usually buy to lets are not regulated buy the Financial Services Authority unless special conditions apply, such as the property will be let to a relative, and therefore some lenders will not consider this type of buy to let. However, in most circumstances this should not affect the manor of the advice you receive.
Currently the Market leading 2 year buy to let mortgage is 3.39% fixed until 31.08.2014 with a maximum Loan to Value of 60%. Which has been launched today, by one of the mainstream buy to let lenders.
Usually the maximum loan to value is 75%, meaning that the lenders usually expect you to be able to deposit at least 25%. However, there are executions to most rules and this is no different, some lenders do offer some schemes with an 80% Loan to value maximum.
Beware of the fees: Buy to lets tend to be slightly more expensive than standard mortgages, recently the interest rates for buy to lets have been running at what appear to be quite low interest rates but beware the fees on buy to lets can be high with some lenders charging percentage based fees.
Most lenders do not expect you to instruct an agent to run the property, just an Assured Short-hold Tenancy agreement with the tenant, which can be downloaded from the net or picked up from your local WHSmiths. This is a very standard landlord and tenant agreement protecting both of you.
There is also the possibility of Let to Buy, this is where you let out your existing property to enable you to purchase a new home as your main residence. Most buy to let lenders have special criteria and deals available for this type of buy to let. The big benefit of this type of arrangement is the ability to brake the chain and not have to sell off your property, given the current market this is a very viable option for most people to consider.
If you would like more information on Buy to Lets, Let to Buy’s, the 2 year deal mentioned above or other financial or mortgage advice, please contact us on 01636 870 069 for your free consultation.
Philip Dales Cert PFS Certs CII (MP & ER)
DALES Independent Financial Advisors, are a whole of market mortgage broker and independent financial advisors. Authorised and Regulated by the Financial Services Authority. The Financial Services authority do not usually regulate Buy to Let mortgages.