Although it may seem difficult to believe, recent increases in interest rates and the resulting black clouds over would-be home buyers may show a silver lining for buy to let investors.
Results of research carried out by a leading specialist in buy-to-let mortgages indicate income from letting is firm and demand for rented property is very strong. Many landlords report a healthy surge in interest in such properties and reveal their intention to increase their portfolios to match the demand.
Such landlords are performing a valuable role in the provision of housing for those who are unable to afford to take the first step on the home-owning ladder. Also there are lots of people who are unable to make the commitment to settling in one area due to the need for flexibility as they develop their training or career plans. With the recent hefty rises in the price of property in addition to the rising costs of borrowing, the demand for rented property is unlikely to abate.
Although some people take the view that any escalation in interest rates will frighten investors into getting out of their investment, this has not been the case in the past. More than twenty years ago, during the significant turn-down in the housing market, buy-to-let was buoyant and indeed showed the greatest ever growth period in that time.
The Association of Residential Letting Agents recently published research shows that just over 2 per cent of landlords would sell if there was a drop in house prices, whilst around 60 per cent of investors in this market are actively looking for more buy-to-let properties.
Things are looking bright for these investors and buy-to-let seems to offer a solution to many people’s problems for some time to come.
If you’re considering becoming a landlord, you’re not alone. Thousands of small investors have gone into the market in the past few years, many owning a single buy-to-let property.
There are lots of lenders who specialize in this market. Buy-to-let mortgages are based on potential rental income, rather than the borrower’s income. Normally lenders ask for a 20 per cent deposit on the property, although things are altering in this respect and some lenders will now lend a hundred per cent or even more!
Lenders are happiest when the monthly income amounts to around 130 per cent of the mortgage payment. This means if you’re paying £1,000 per month then ideally you would need to charge £1,300 per month to your tenant. Lenders are slightly more relaxed about this criteria but it’s a good target to aim for and allows for the odd period when you’re without tenants or for repairs and renewals.
The equity in your own home could help when it comes to financing your investment. You may be able to raise sufficient funds by remortgaging to pay a deposit, or even to finance the full project.
When you’re on the look-out for a property, there are lots of points to take into account. A local property may be easiest to keep an eye on and you can do a tour of the letting agents to see what sort of rental income you can expect. University towns offer a good market for tenants. Not everyone is looking for a large garden down a leafy lane – put yourself in a tenants place and they may be looking for something simple and manageable for a year or two, not a manicured lawn.
It’s certain worth looking into. The internet’s the place to look, both for property and for mortgage advice. Find a broker who’ll search through the deals that are available and come up with some sound propositions. They’ll offer you the best mortgage that’s available. That’s what they’re there for.
Author Resource:-
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