Buy to Let Remortgages to expand property portfolio
Buy to Let Remortgages to expand property portfolio
About Buy to Let: Purchasing property with the intention to rent to another individual is known as Buy to Let. 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 can be extremely lucrative, although it should not be underestimated, like any investment, buy to let provides 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 tenant's safety. Equally 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 150% of the monthly payment on the property and taking into account the various other fee's involved in renting, the net cash return is usually around 10%. It's expected for a rented property to appreciate at a rate of approximately 10% 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 when investing in buy to let property you should not expect quick capital growth, this is something that will steadily grow over time and is highly dependent on the economic climate of the 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. Buy to let remortgages are also useful as an emergency contingency fund to ride out any changes in the housing market. Is not unusual for Buy to Let Investors to seek remortgage loans frequently, especially when they're focused on purchasing additional properties. If you original mortgage agreement is a few months away from ending then it may be beneficial to consider 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. Landlords must always do their research though when looking to remortgage as switching an existing buy to let mortgage deal can sometimes mean incurring early repayment charges. The Buy to Let Market: The buy to let market has come a long way since its inception over 10 years ago. 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 primary difference between a Buy to let and a residential remortgage is that the former tends to have much higher interest rates. This is because a commercial value is usually involved in the purchase of the home. Finally, as landlords operate as a business (large or small) they have to pay tax on their income. 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.