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.
Showing posts with label Buy to Lets. Show all posts
Showing posts with label Buy to Lets. Show all posts
19 February 2010
New products and lower rates - Confidence returning?
Numerous mortgage rate changes have occurred during the last week or so. Some up, no surprise there then, and some down. Many innovations remain in the mortgage market with lenders offering switch and fix type products enabling you to initially take a low cost Bank Base Rate tracker and, at any time during the term of the mortgage, switch to a fixed rate at no extra cost. Great products, although beware that the switch to a fixed rate will be based on the rate at the time. If tracker rates are on the increase, you can almost certainly guarantee that the fixed rates will also have risen.
One lender has recently re-launched their Buy to Let offerings for properties owned in Limited Company Names and also Houses of Multiple Occupancy (HMOs), including student lets, etc. With Buy to Let rates starting from 4.34% (tracker) and up to 70% loan to value, this is really positive news and signs that confidence in the market is on the up and lenders appetites for volume business is returning.
Further good news as the Co-operative Bank has launched a securitisation deal worth £2.5bn. The residential mortgage-backed securities (RMBS) deal is due to close at the end of February. What does this mean? In short, it's a volume of mortgages, bundled together and sold off to investors as a package. On this basis, it dilutes the downside of any one borrower defaulting. For the industry, it means that the Co-op, once this book is sold, should be able to lend a further £2.5bn in new lending. Others, including Lloyds and Nationwide, have recently completed similar transactions. If these type of deals can once again become more standard, it will be great news for the market and economy.
Microbiz, the HDC initiative for small businesses, takes place on 13th March at the Drill Hall in Denne Road. Please support this – AToM will be there!
Finally, the WSCT Business Awards are just around the corner and if you have not yet voted for your chosen company of the year, then please do (hint hint!).
One lender has recently re-launched their Buy to Let offerings for properties owned in Limited Company Names and also Houses of Multiple Occupancy (HMOs), including student lets, etc. With Buy to Let rates starting from 4.34% (tracker) and up to 70% loan to value, this is really positive news and signs that confidence in the market is on the up and lenders appetites for volume business is returning.
Further good news as the Co-operative Bank has launched a securitisation deal worth £2.5bn. The residential mortgage-backed securities (RMBS) deal is due to close at the end of February. What does this mean? In short, it's a volume of mortgages, bundled together and sold off to investors as a package. On this basis, it dilutes the downside of any one borrower defaulting. For the industry, it means that the Co-op, once this book is sold, should be able to lend a further £2.5bn in new lending. Others, including Lloyds and Nationwide, have recently completed similar transactions. If these type of deals can once again become more standard, it will be great news for the market and economy.
Microbiz, the HDC initiative for small businesses, takes place on 13th March at the Drill Hall in Denne Road. Please support this – AToM will be there!
Finally, the WSCT Business Awards are just around the corner and if you have not yet voted for your chosen company of the year, then please do (hint hint!).
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