Summary
Buy-to-let mortgages are booming again. What's changed and what, as a new landlord, do you need to look out for?
Buy to Let Mortgages. Boom time returns. Page 2
Author: Michael Challiner
Simultaneously we have seen a trend for lenders to increase the
- Getting the Best Mortgage Loan With a Bad Credit Rating
- Sorting a mortgage out can be stressful, especially if you have a poor credit history. This article provides some useful advice
- Interest Only Home Loans
- An introduction to the workings of an interest only mortgage.
- Mortgages. First time buyers let down by the governments Homebuy scheme.
- At this stage, the Governments Homebuy mortgage scheme for firsttime buyers seems a waste of time. This article explains why.
- Mortgaging for funds
- A new study has found that pensioners are concerned that they will have to sell their homes or take in lodgers to make ends meet.
- Buy to let – a change for the better
- Do you own a buy-to-let property? There are some proposed new rules regarding tenancy agreements. Find out more. Buy to let – a change for the better
Interest rates on buy-to-let have also fallen. 4.75% is available from the Mortgage Trust on a three-year fix whilst 4.79% is available from the West Bromwich Building Society fixed for a two years. Both these deals incur a 1.5% arrangement fee. On the West Bromwich deal, when you recalculate the interest rate and include the arrangement fee amortised over two years, the equivalent rate rises to 5.54%.
Arrangement fees should not necessarily be a problem for landlords whose prime concern is cash flow. For these landlords it can be worth paying a large fee to obtain a low headline interest rate. That's because the rental income/mortgage payment calculation is based on the headline interest rate and this reduces the rental that has to be charged in order to meet the lenders income criteria.
If you're interested in joining the buy-to-let boom, remember to do your homework. Carefully research the local rental market - look at the rentals being achieved, the trends in property prices and levels of vacant to let properties.
And be especially careful especially if you're considering a city centre. Some lenders are becoming concerned at the potential oversupply of new flats and apartments in city centres they believe are becoming overpriced. Developers are responding by offering tempting cash back and discount schemes rather than reducing prices. But this can sometimes serves to mask the problem of over pricing. Realising this for some cities, lenders are reducing the value to lending ratio back to 75%.
Also remember that it's important to budget for the inevitable periods when the property is empty. In an essentially demand and supply market, if the rental market in your area becomes oversupplied you could be hit by lengthy vacancies or be forced to reduce your rental prices.