Is commitment the key to buy to let?
Following on from reports of the vast potential rewards of buy to let since 1996, a study by Paragon Mortgages suggests that if landlords are willing to commit, the strong returns should continue over the next decade. Even with interest rates projected to rise to 4% by 2021 – and with Paragon being cautious over house price rises – a return of 11.3% compound annual interest is being predicted for landlords with 75% loan to value mortgages. The real key to achieving such success is to invest in a number of properties, carrying out regular remortgages to withdraw enough cash to use as a deposit on another property each time.
Of course, there is plenty to be wary of despite these projections. They could, for example, be seriously disrupted if Labour comes into power and implements its rental reforms. Even just the prospect of this could have a negative impact on the market in the coming months. There is also increasing concern about house price increases, which could lead to interest rates rising sooner than expected. The key is to do your research, understand the potential implications of the reforms and be sure that your mortgage costs will always be comfortably covered by rental income. If you are prepared for the long term, you will have maximum control over the rewards of your investment.
New Mortgage Options
Switching to a better deal is not just a way to save money. As we touched on above, if you want to expand your portfolio, remortgaging is a good way to release capital for a new buy to let investment. Here are some of this week’s new offers. Please always use a specialist independent broker to get access to the best package for you.
The Mansfield Building Society has launched a 2-year fixed rate buy to let product, with the rate reduced by 0.5% to 3.99%. It is available for both purchases and remortgages, up to a maximum loan £300,000 and 70% loan to value (LTV) at rental income cover of 130%.
Skipton Building Society has launched a new range of fixed and discounted rate products. It includes a variety of two, three and five year fixed rates, as well as two-year discounted rate products, from a starting rate of 2.38% with a choice of fee and rate blends to maximise flexibility.
Finally, Bridgebank Capital has launched a new residential investment buy to let bridging product with fixed interest rates of 0.85% for experienced property landlords. It is designed to fund residential buy to let investment property, and will include cases requiring light refurbishment.
Tip of the Week
The threat of eviction for tenants is at its highest level for ten years. Landlords should always understand the correct notice periods and procedures. Rentify’s guides will give you everything you need. Although most of the evictions come from social landlords, private landlords must also be prepared for this outcome. The full procedure for evicting a tenant could last for four or five months in certain cases so make sure you budget accordingly and are able to withstand void periods. Also be ready to get your property back on the market as quickly as possible.