What many investors don’t realize is that there is a difference between the mortgage deals available for the seasoned investor (those with 5, 10 or even more properties in their buy to let portfolio) and the novice or inexperienced investor who has just started their investment journey.

For experienced investors with a large investment property portfolio, lenders will treat them as a ‘professional’ landlord even if property investment is not their main profession. Lenders will often have a ‘cap’ on how many properties an investor can have before they will no longer lend to them. For example, Abbey has launched a great buy to let mortgage product but their criteria is that investors cannot have more than three investment properties. It may seem illogical, as you would think lenders will value experience when it comes to property investment, but they will see you as a higher risk. The Abbey deal is very competitive and certainly worth looking at – but only for those with a small portfolio.

The key here is to talk to someone who understands property investment, not just mortgages, and has experience in moving forward if they want to buy three or more properties. I can help you find the best available mortgage deal if you have a large property portfolio.

Although my main profession is an independent mortgage advisor, I’m also a professional landlord. I have built up my own property portfolio and understand the pros and cons with the varying strategies available to investors. When I talk to clients, it’s not really a case of looking at the cheapest deal it’s about the bigger picture. And remember, you really need to future proof when it comes to building a portfolio otherwise you could end up in financial difficulty further down the line when rates increase. Give me a call for a no obligation chat, otherwise drop me an email. I can also help with re-mortgage advice, bridging finance, raising a deposit for property and more.

Read my post and listen to my audio on how much deposit you need for a buy to let mortgage.

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Ideally you need a 25% deposit but some lenders have started to relax their criteria, so you could get away with 20% deposit. In fact, there is one lender that is now offering a 15% deposit product. However, the challenge with putting down a smaller deposit is that the rates aren’t as competitive and lenders are making the hoops you jump through in terms of approval more challenging.

Funnily enough, there is a difference between the inexperienced investor – i.e. someone with one or two buy to let properties, and the experienced investor – someone with 5, 10 or even more buy to let properties in their portfolio. (link to the other blog post)

In terms of mortgage products available, 15% is the lowest you can find and at the time of writing. The criteria for deals such as this isn’t particularly restrictive, it’s just more difficult to get the application approved and as you are putting down a small deposit your cash flow will be limited, so I would suggest to all new investors looking for a product like this to remember that somewhere down the line rates will increase and you need to be able to future proof your investment. You can get a deal at say 5.5% but with a 25% deposit you can get a good rate of around 3.5%. However, when your deal or fixed term ends, you could end up paying 6.5% or even more. If you can’t move to a new lender you could perhaps find yourself paying upwards of 7-8%. Therefore it’s important to do a future stress test and cash flow test to ensure that you will be able to afford 8%, if you can’t then I wouldn’t advise going ahead with the deal and try and find additional deposit to put down.

If you’re thinking about going into buy to let and you have the cash – it’s better to go for the deals where you put in as much as possible. If you can get away with 20% that’s fine but 25% deposit is better, rates are not only slightly better but you are also future proofing and although it’s good to put 30% down, it’s wise to keep some back for a future purchase of a buy to let property.

Although I’m a buy to let mortgage advisor, I’m primarily a property investor and that’s what puts me in the ideal position to offer my clients sound buy to let investment advice. I understand the pros and cons of the various strategies, and believe that it’s about looking at the bigger picture in order to build a successful portfolio. I can also advise on bridging finance, first time home buyers and re-mortgage. Give me a call for a no obligation chat or send me an email.

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At the peak of the credit boom, approximately 1.3million interest only mortgages were written.

Interest only mortgages were appealing for first time buyers and those with poor credit history to get on the property ladder – but when the mortgages were written the lenders didn’t ask to see any repayment plans or proof of savings plans. Therefore, when these mortgages come to the end of the term, there will be no way of paying the full capital sum back.

In addition many of these borrowers face negative equity.

This is clearly a looming problem and in the present slump in property prices it could be a ticking time bomb.

My guess is that lenders will take a practical approach and allow interest only payments after the due date as the alternative will be potentially 1 million repossessions.

Contact me to find out what you can do if you have an interest only mortgage and are worried about what to do when the interest only mortgage term ends.

Watch this space!

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Last month there were 30,533 mortgage approvals, with a combined worth of £4.8 billion. Although figures are lower than this time last year, there was a small upturn on just over 28,000 worth £4.5 billion according to a recent British Bankers’ Association (BBA) report.
In August of this year, the Bank of England and the Treasury’s £80 billion Funding for Lending Scheme aimed to improve the flow of credit to households and businesses. Some lenders have stepped up competition around mortgage rates, most notably Tesco with their 1.99% residential rate.

Despite this £80billion being drip-fed to the banks, the deals seem to be focused on borrowers with large deposits. There is no logic in that as we need the Government and the banks to focus on helping the much needed first time buyers. The Tesco mortgage requires a 40% deposit, which simply isn’t achievable for most home buyers. This is what will kick start the housing market.

The lowest number of monthly mortgage approvals since the BBA had records took place in June this year.

For more information on why mortgage approvals are falling, and to ensure you find the right product for your circumstances to help achieve mortgage offer contact Mortgage Savers.

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Their 2 year fixed rate mortgage has been reduced to to 2.79%, available up to 60% LTV. For a 70% LTV the rate is being cut down to 2.99%, available on a two year tracker rate.

Virgin Money has made the cuts to demonstrate their commitment to supporting the mortgage market with new lending. The cuts will help buy to let mortgage customers in particular, and the deals include increased cashback available.

I think it is good to see some lenders cutting their rates especially as the government (you and me) are pumping £5Bn into the financial system to improve things.

The benefits will take time to filter through but clearly any positive action is welcomed and all lenders should be embracing the scheme and passing on the savings or be named and shamed!

Some of the latest new deals have tended to require large deposits, 25-40% which is not helpful for stimulating the first time buyer market and we will not have the much needed bottom up effect.

The powers that be need to ensure that its all well and good making headlines with these initiatives but the funds are utilized in the way it was intended…

For advice on residential or buy to let mortgages contact us.

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Although school leavers are facing financial difficulties with tuition and living fees, the number of students is on the increase.

Accommodation is one of the largest outgoings that a student will face, and there has been a rise in investors of student accommodation. People are being encouraged to invest in student bedsits and it could turn out to be a lucrative investment. There are increasing numbers of people investing in student flats and bedsits as part of their portfolio – and even large organisations such as Legal & General and large pension funds are jumping on the bandwagon and investing in these properties.

There have been severe shortages of student accommodation due to the lack of University funds for accommodation, in London there are only 60,000 university beds by way of halls of residents or student digs, yet there are 290,000 full time students. This shortfall means that demand will never be a problem.

Student lets like HMO’s is a specialist buy to let market – it can give far better returns than a single AST household but like anything you need to gem up on this area, returns of 12% or more are the norm so offers of 6-7% or very poor!

There are experts out there who know the student buy to let marketplace and I would suggest anyone embarking into this investment channel should attend a suitable seminar/workshop and learn all the hints and tips that can make it a profitable exercise.

We can provide details of such courses than are run by experts in their field, helping you decide if student buy to let investments are for you. Contact us to find out more.

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The income you can achieve from buy to let investment if you have enough money for a deposit is an attractive investment compared to low savings rates and the volatile stock market.

With the low house prices, rising rents and great buy to let mortgage deals, investors are tempted to continue to invest.

If you want to be a property investor, there are some top tips for buy to let investment that you need to put into practice.

Make sure you have researched the property market. Could your money perform better in another investment channel? A few years ago savings rates would beat most investments. With currently low rates investing in buy to let means that putting your capital into property that could fall in value may not be as attractive as a 5% annual return on a fixed rate account. You could also research ISAs, shares or investment funds.

Make sure you choose the right area. Do your due diligence – and remember that a promising property is a place where there is demand and little supply. Check out your key market and the amenities they will be looking for i.e. for a professional couple it will be transport links, but for families it will be schooling.

Ideally your lender will want to see that you will achieve 125% of the mortgage repayments in rental income. You will also need to account for the fact that lenders now want a 25% deposit.

You will also need some money to cover an rental void periods, rise in interest rates and to allow for renovations or repairs.

Make sure you talk to a whole of mortgage broker who knows everything there is to know about buy to let mortgages – and who is perhaps an investor and knows the pitfalls of buy to let.

Most landlords (and aspiring ones) are not aware as to the fact that there are landlord networking meetings all around the country, they have speakers on subjects relevant to the buy to let arena as well as being able to meet other landlords (it is a lonely occupation) and can cost as little as £10 for an evenings meeting.

Well worth attending!

If anyone wants details of a meeting local to them please contact me.

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I’ve just read a post (link below) by Mark Alexander, landlord and founder of Property118 who states that the buy to let rule of thumb is to have 20% of the value of your buy to let mortgage in cash at any given time. This means that you have the correct level of liquidity in reserve, in order to get you through tough times in the rental market that all landlords experience now and again. This includes negative cash flow caused by high interest rates, unexpected costs or bills, rental voids and tenants that don’t pay their rent on time to name a few.

Buy to let is in essence a business and should be run as such, too many people regard it as a hobby and fall fowl when things go wrong and they have insufficient funds to put things right so Mark is spot with suggesting having a cash reserve.

Leveraging ones position is a matter of personal risk assessment but I see nothing wrong with running at 75% or lower, as 80% LTV deals can trap you with one lender. If down the road you need to re-mortgage because, for example, the likes of Kent Reliance reverts to 6.58% when the current deal finishes – this could cause you problems in the future!

Read the post here.

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Bridging is definitely a short-term solution, and lenders will always ask for the exit strategy. If the exit strategy is the sale of an existing property then this can be risky in the present market conditions, so you must be sure that your property will sell in 6-9 months otherwise you could be in hot water.

If you have fallen in love with your dream home and have had an offer accepted, but you can’t sell your home then a bridging loan can help you to buy the home you have your heart set on.

However, we recommend that you tread with caution, as a bridging loan is considered as the last result as it’s a very expensive way to borrow money. They are designed to see you through the short term, and if you consider the money you have already spent on the purchase process, this can make it a slightly more attractive option.

At present, it is common for house sales to fall through which is why you need to be very careful before making this decision.

There are two types of bridging loans. The ‘close’ bridge is available to buyers who have already exchanged on the sale of their property, as very few sales subsequently fall through. An open bridge loan is for people who have found a property but have not sold their home, although you must have plenty of equity to take up an open bridge loan.

Bridging loans have high interest rates. Typically the Bank of England rate plus another 2% to 2.5% added. There will also be an arrangement fee of up to 1.5%.

If you would like advice on bridging loans, contact Mortgage Savers.

The post When should you consider using a bridging loan to purchase property? appeared first on Buy To Let Mortgage Advisor.

I’ve just read this post from someone asking for advice on becoming a HMO landlord.

He has been doing sums and wants to get out of the rat race and info HMO ‘landlording’, believing that it’s a profitable route into property investment.

He has found lenders who will back him up, but wasn’t sure if it’s something people do individually or set up as a business. Although he had a reasonable grasp of tax and how it would work, he wanted to know what the advantages were of doing this as a business. His plan was to buy one HMO going concern, and to buy a property that he can renovate.

In my view, there is no doubt that HMO’s are very good cash cows, there can also be a lot of pitfalls you need to know about prior to embarking onto this route, especially if you are new to the landlord game.

I suggest that anyone in this position who is considering HMO as a business to attend a training seminar by someone who is an expert on the subject such as HMO Daddy Jim Haliburton – his introductory one-day courses can be had for about £200 and they are highly recommended!

To discuss financing your investment, whether HMO or a standard residential buy to let property, give Mortgage Savers a call today for impartial advice.

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