Landlords and Buy to Let Remortgaging
Nov 1st, 2011 James McHeggins
About buy to let: purchasing property to let is simply a form of residential investment. Investment in residential property became more attractive when the 1988 housing act introduced a new form of tenancy that gave more control to landlords over their properties. Investing in property should not be underestimated, although it can be quite lucrative, like all investments, they hold no guarantees. Renting out property is a long term commitment and is far more complex than buying property for yourself. For instance, there are various legalities surrounding your property like the responsibility of your tenants safety. Similarly there are various other hidden fees to consider, such as letting agency management fees, costs of maintenance and potential repairs.
Generally, landlords set a gross rent fee of approximately 150pc of the monthly payment on the property and taking into account the various other fees involved in renting, the net cash return is usually around 10pc. It is expected for a rented property to appreciate at a rate of approximately 10pc each year but this does vary according to the economic climate and the state of the housing market at any particular time. Experienced landlords know that investing in buy to let property does not automatically mean quick capital growth. Profit making in this type of property depends on the economic climate of the time and something that steadily grows over time.
About buy to let remortgages: (also commonly known as investment mortgages). Landlords often look to remortgage their rented property to make improvements and/or renovations to the property, to expand their property portfolio, to consolidate other outstanding bills and to release some extra capital to make larger one-off payments. It is also practical as an emergency contingency fund to ride out any changes in the economy. Is not unusual for buy to let Investors to seek remortgage loans frequently, especially when they are focused on purchasing additional properties.
If your original mortgage deal is coming to an end, it may be a good time to consider obtaining a remortgage. By doing so, you can avoid paying your lenders higher standard variable rate (SVR) which you will be automatically transferred to once your original deal ends. It is always recommended to research all the available options when considering a remortgage to ensure that you avoid any early repayment charges.
The buy to let market: since its inception, the buy to let market has rocketed within the UK. With the number of school leavers heading to university on the rise, immigration continuing at a steady rate and affordability issues preventing many from buying their own homes, demand for rental property remains keen. As demand is still fairly high, there has been a huge increase in the level of lenders in the buy to let market, despite perhaps being at a lull throughout the duration of the recession. There are numerous incentives out there which claim to offer the best remortgage deal with free valuation, free legal charges and waived product fees.
Traditionally, buy to let mortgages were dominated by variable rate products, but as the market has grown, lenders have diversified their offerings to include fixed rates, trackers and flexible mortgages, each with their own specific benefits. Purchasing buy to let remortgages requires access to the capital necessary for required down payments and other expenses. Therefore, as with other remortgages, you may need to show proof of income in order for the lender to consider you for a loan. Mortgages on other properties that the landlord has will also be taken into account. Providing you can prove that you have a stable financial background (and future), you should have little problem obtaining the best remortgage deal.
What is the difference between a buy to let remortgage and a residential remortgage? The main difference is that the former usually tends to have a higher rate of interest. This is because a commercial value is usually involved in the purchase of the home. Ultimately, landlords operate as a business and therefore a subject to paying tax on any income they receive from renting. When selling a property, any profit made will also be subject to capital gains tax. Plus, if a landlord dies the home will be part of their estate and therefore could be subject to inheritance tax.About the Author:
This article was written by financial expert James McHeggins. James works for http://www.JustRemortgages.com who specialise in finding the best remortgage deals for all their customers.
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