Hond Financial

Posts Tagged ‘buy to let’

Before listening to ‘buy to let mortgage advice’, there are several important issues to consider in order to accurately calculate how big a mortgage you will need.  Every hidden cost needs to be taken into account to make the most out of your investment opportunity.

The main figure you need to keep in mind is 125%. Ideally you want to gain a return of a minimum of 125% on your investment, which, if you invest correctly, will cover all of your costs.

We base this figure on the assumption that the property will be empty for 2 months per year, so all your calculations should only factor in 10 months rent and not 12.This covers the possibility of the property being empty after tenants move out, along with maintenance and repair costs. This is the same percentage that banks usually use when calculating how much to lend you on a buy to let mortgage.

Choose a Prime Location

The first thing to do before you even consider a mortgage is to research different locations that are prime areas for lettings such as:

* University Towns
* Close to a Large Hospital
* Suburbs Offering Good Commuter Links
* Areas About to be Regenerated

Research the likely rental income you can expect from various 1, 2, 3 and 4+ bedroom properties including houses and apartments.

Who Are Your Tenants?

If you’re looking at university towns in the hope of letting to students the rental income will be different than if you are letting to a family.  Take these factors into account.

Other Possible Costs

* A 25% deposit for the mortgage
* Mortgage Arrangement Fees
* Solicitors Fees
* Agent Fees (around 10% of rent)
* Upkeep & Maintenance
* Redecoration
* Auction Fees

Once you’ve costed out the entire project and decided that there could be some money to be made from buy to let, it’s time to take my first class buy to let mortgage advice and it may surprise you!

Speak to Your Bank

Don’t go to the myriad of mortgage comparison websites just yet.  Your best bet, and this is the surprising element, is to call your own bank where you have your current personal mortgage and ask them for a deal! Haggle with them!

Current mortgage rates for buy to let are between 4.69% – 7.39%, so armed with that information – ask them for their best price.  The call centre customer service assistant may not know what to say, so in that case ask to speak to someone who does!  Reiterate to them how good a customer you have been and learn some more of my top 10 Indian negotiation techniques to aid you.  

If that doesn’t work then move to the comparison sites… but some more useful buy to let mortgage advice is to also contact mortgage brokers. While they might charge a fee if you take up a mortgage with them, they will probably have access to lenders not found on the comparison sites, and this could save you thousands.

The housing market took with it a different kind of property development when it crashed a few years ago. Banks have decided to allow a special type of mortgage known as buy to let mortgages since the middle of the 1990s. These loans are for properties the buyer intends to rent out and the repayments are calculated based the projected rental earnings for the property rather than the wages and earning of the buyer. These loans dried up completely for a while and nobody was able to acquire one. Now, on the other hand, banks are starting to make buy to let loans, and are permitting property owners to obtain a buy to let remortgage.

A buy to let remortgage can now be used to refinance an original mortgage and take advantage of a better interest rate as well as payment terms, or when the owner is trying to grow their portfolio by financing another property purchase.

It might not be as easy to locate a buy to let remortgage as previously, although numerous lenders are willing to grant credit to property owners if they have an adequate credit score. It’s easier to get a loan if the property is currently rented, and the owner is able to proove how much income it produces.

Repayment terms for buy to let remortgages can be set up so that the owner is required to pay only the interest due each month or as a full repayment loan. The terms that will best suit the owner differ among different portfolios and different owners.

In general, the key criteria that banks look at when making a decision on a buy to let remortgage is whether or not the property can produce income equal to 125 percent or more of the interest that will be due on the loan each month. There’s a good chance that the loan will be approved if the answer is yes.

If you are able to use a buy to let remortgage to fund the purchase of other property, this can be a smart business decision. This way, the property that is already mortgaged remains the only one being risked in the event of problems repaying the loan. It’s also simpler for you to handle a single loan payment every month than having to deal with separate payments on separate properties.

The main benefit of obtaining a buy to let remortgage or remortgage is that the income derived from the property usually is enough to cover most of the payments. Depending on what you do for income, other sources of income might not be high enough to even come close to loans on properties no matter what size they are.

Property might have to dedicate some time and research to locating a buy to let remortgage (called maximale hypotheek berekenen in Dutch). However, making that effort is worthwhile if you want to refinance your current buy to let mortgage to be able to take advantage of a change in terms or finance a new purchase without risking the new property. It may also be easier to get a buy to let remortgage for a purchase than to get an original mortgage on the new property.