Is the Buy to Let market seeing a resurgence?

21/5/10 - Is the Buy to Let market seeing a resurgence? The Mortgage Works (the specialist lender arm of Nationwide) increased the amount they would lend against the value of a property to 80%. As First Time Buyers struggle to raise deposits to climb onto the property ladder and some turn to, or continue to rent, the Buy to Let market is buoyant. Such increases to the loan to value levels are a huge step forward and demonstrate that lenders have confidence in this area of the mortgage market. Although TMW are the only lender offering 80% currently, it is anticipated that other lenders will soon follow suit. This can only be good for both prospective and current landlords as competition returns to the market.

Purchasing a property for investment purposes, with property prices relatively low, is quickly becoming an alternative source to traditional long term investment vehicles. Obviously, tax implications should be reviewed with a professional adviser, but with some payment terms ranging from 5 to 40 years, and interest rates competitive, this is an option well worth investigating in some detail.

Buy to Let properties will often provide a modest monthly return over and above the mortgage payment. The additional amount can be used to supplement income, or, with flexible mortgages, can be used to “overpay” the mortgage and reduce the term.
Most lenders in this sector will require the rental income to exceed the mortgage payment by up to 25% and, after costs such as managing agents this should leave some spare cash to cover repairs, maintenance and landlords insurance. It should also enable a fund to be established to cover the mortgage payment in the event that there is no tenant in situ for a while. Remember that the mortgage still has to be paid!

Generally, Buy to Let should be considered as a long term investment. That said, it is a popular sector of the market and can provide a source of income (after expenses) and capital appreciation over time. Remember though that the value of property can fall as well as rise and you will need to take this into account in your planning.