Property Refurbishment Buy to Let

Over the course of the next two years or so, there are going to be some losers in the property market; those who have to sell up fast, particularly Buy to Let investors who have over “geared” their portfolios, cannot re-mortgage away from a high charging standard variable rate and are forced to sell of part portfolio’s to reduce monthly outlay. However, business is business, and wherever there are losers, there will also be winners!

We have recently be seeing a huge number of these properties coming onto the market, under value, distressed and in need of some tender loving care.

A chance to steal!

We have managed to find a number of mortgage products that will allow a purchase of a structurally sound property, which needs, say a new bathroom, kitchen and decorating “make over”. Providing that the property has an existing usable bathroom and kitchen, however poor the condition, this product seems to fit.

Most ordinary Buy to let products would fail this type of purchase in a key area; rent. Buy to let lending criteria, states that the mortgage loan must be supported by rental coverage, say 125% of the interest only monthly cost.

The lenders surveyor, will state that due to condition, the property will not attract a tenant, therefore no rent, and the application will fail.

These special products are “one off” Buy to Let products, that do not use rental to support the loan, they use self certified personal income from all sources.

Perfect!

What more, whatever your exit strategy they work. If you want to take your profit and run, you can.
If you want to do the property up, and retain as a rental you can. The products are “portable”, which means that you can take them with you to your next project, simultaneously replacing them with a now rental based buy to let product on the re-furbed property.

Let Property Strategies are buy to let mortgage brokers - http://www.letpropertystrategies.co.uk/

What Is A Buy To Let Mortgage?

If you are keen to become a property investor, sooner or later you will be looking at obtaining a buy to let mortgage. In this case, you will need to find out as much as possible about this type of loan.

First of all, what is a buy to let mortgage?

A buy to let mortgage (sometimes called a property investment mortgage) is a loan secured on a property which you are purchasing purely for the purpose of deriving an income from it – not to live in. This type of mortgage has only been around since the early 1990s - that was when mortgage lenders began to realise that there was a growing interest in this type of investment by ordinary people. Because this type of purchase is seen by lenders as carrying a greater risk, they impose different conditions than they would on an ordinary residential mortgage.

It’s important therefore when you apply for your mortgage that you make it clear you are not buying the property to live in yourself. If you don’t, you could find yourself in trouble. The main requirements imposed by buy to let lenders include:

• A deposit of at least 15-20 per cent.
• The achievable rental yield must be around 130% of the mortgage repayments – some require it to be 150%.
• In addition, some require the annual yield to be at least 8% of the mortgage amount.

For example, suppose you found a property as a potential buy to let costing £200,000. You would probably require a deposit of 20% which is £40,000, so the mortgage you would apply for would be £160,000. At 6%, interest only, this would require a monthly payment of £800. The lender would therefore need to see an achievable rental yield of £1,040 per month (at 130%) before agreeing to grant you the mortgage. This would usually be calculated by the surveyor on the basis of comparable rental properties in the neighbourhood.

Remember that, for most lenders, your own income or financial circumstances is not the first consideration when it comes to buy to let mortgages – in fact, many don’t look at your income at all.

The reason the lenders impose these requirements is not only to make sure you can afford your mortgage payments, but to ensure you have a hedge against other factors that will affect your profits, including:

• Void periods (when you have no tenant);
• Letting agency fees;
• Maintenance and repairs;
• Insurance payments.

Of course, once you have allowed for all these things, you still need to make a profit. If you don’t make any profit, there is really not much point in doing all this in the first place!

The lender won’t be concerned about this so it is up to you to factor this into your calculations – BEFORE committing yourself to the mortgage. If there is any doubt as to whether there is enough demand in the area to command this level of rent, better be safe than sorry. Pull out and try another area.

Remember that getting a buy to let mortgage is first and foremost a business proposition, not an adventure. Be hard-headed, do your calculations, and take advice from a specialist buy to let broker. Then you stand a good chance of opening up a successful business.

Buy To Let Mortgage Advice Can Make All The Difference

When you are looking for your buy to let mortgage you have a lot of decisions to make – especially if it’s your first time.  So it’s really sensible to start off by seeking buy to let mortgage advice, rather than just diving in and hoping for the best.  Look for a mortgage broker who is a specialist in buy to let.

So what are the possible reasons you may need buy to let mortgage advice?

Each buy to let lender has its own individual ways of working out how much to lend you.  The decision is usually based wholly or partly on the potential rental yield or potential market – this may be estimated by the surveyor when checking the property.  Most lenders will look for the potential monthly rent to be up to 130% of the monthly mortgage payment – this helps to provide a hedge against void periods and other expenses.  Some also want an annual yield of at least 8% of the mortgage amount.  You need to choose your lender carefully to get the best deal.

Even if you are hedging against additional costs, you do need to be very clear as to what these additional costs might be.  If you do not live very close to the property, you would be well advised to use a letting agent as problems can arise at any time of the day or night – agents usually charge about 10% of the monthly rent.  Other costs include property maintenance, buildings and contents insurance, and legal insurance to cover costs of evicting tenants or in case a tenant is injured on the premises and sues you.  A specialist adviser will help you calculate the exact costs – if you don’t budget for them, you won’t make a profit.

When arranging your buy to let mortgage, you need to try to set the level of your repayments so that you can afford them if there is an interest rate rise.  Many buy to let investors choose interest only mortgages or 2-3 year fixed-rate deals.  Of course, with interest only deals, the payments are lower but the capital is still outstanding at the end of the term.  This is more suitable for you if you aim to continue building your portfolio – it enables you to re-gear your property capital in order to increase the number of your properties.  A repayment mortgage may be more suitable for you if you are using the property as an alternative pension plan.  You really need to obtain buy to let mortgage advice before deciding which kind of mortgage to go for. 

Buy to let mortgage advice is important – in fact it can make all the difference to your success or failure.  You should remember it is not regulated by the Financial Services Authority in the same way as other mortgage advice.  Nevertheless, your buy to let mortgage adviser will want to build up trust and an ongoing relationship with you, so you have every reason to expect the adviser to put your interests first, just as any other adviser would do.�

Good news for buy to let landlords

A recent survey by Gumtree has revealed a shift in British attitude to home ownership with many more people choosing to rent rather than buy.

Tenants, homeowners and landlords were surveyed as part of the report which found that more than two in three 18-24 year olds say they are not planning to take out a mortgage at any time.  51% also said that our obsession with property ownership needs to change and 78% said renting was more viable than buying in a credit crunch period.

Whilst this news means less mortgage business and fewer first time buyers, it is a boost for the rental market and buy to let landlords. We are well aware of the shortage of property in general and rental agents have already been reporting stronger demand for tenated property.

If you would like to discuss buy to let mortgages, portfolio finance or portfolio mortgages please contact Let Property Strategies on 0800 458 6485.

Buy to let rental yields on the up

Research by Paragon Mortgages has stated that rental yields on buy to let property rose by 6.4% in May 2008. Their Buy-to-Let index indicates that rental incomes have risen by nearly 12% over the last year with property values going up by 7.5%.

Rising but to let rental income can be linked to both genuine increases in the rent payable along with a decrease in the investment property value, thus improving the overal percentage returned to the investor. We would also expect an increasing tenant demand as the lack of suitable mortgage funds and products stops first time buyers getting on to the property ladder.

Whilst falling property prices can unnerve homeowners, professional landlords and property investors see deals to be made, with investment properties getting cheaper to buy.

New buy to let mortgage website

Enhanced Wealth Limited is quite a diverse company. We are well established with real staff in a real office!

The majority of our buy to let mortgage business is carried out through an associated Company called Let Property Strategies Limited who are based in the same office. This keeps things nice and simple at our end. Let Property Strategies Ltd is owned by Sean Horton & Norman Phillips who also own Enhanced Wealth Limited.

We have just revamped the Let Property Strategies website at www.letpropertystrategies.co.uk to give it a more modern and fresh style. In addition, we have added more information on holiday let mortgages and commercial finance, classes of business which Enhanced Wealth still exceeds at. We hope that this information is useful as commercial finance is increasingly being used to fund buy to let investments.

Enhanced Wealth has many other prescences on the internet, the main ones are:

• www.enhancedwealth.co.uk - Mortgages, Insurance & Commercial finance
• www.holidayletmortgages.co.uk
• www.petquote.co.uk - Pet insurance for cats and dogs
• www.loansconnection.co.uk - Secured personal loans
• www.policemortgageadvice.co.uk - Police mortgages

Press release for Let Property Strategies new website