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Buy to let

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In terms of investment, property is still seen as a worthwhile and prudent place to put your money. This is particularly true for the long- to medium-term. And it's not purely the domain of the wealthy. Many people have invested and continue to invest in property via buy to let mortgages.

There are two main reasons why investment property buying can work. The first is the long-term capital gain of increasing equity over time. The second is the potential profit from rental income.

As we know, there was a fall in house prices following the financial crisis of 2008.

Since 2010 house prices have in the main levelled out and, whilst there is no guarantee, it is not unreasonable to expect a steady increase in value over the next say 15 to 20 years.

Furthermore, there has been a marked increase in demand for rental properties from tenants over recent years - making buy to let even more popular.

Profit from rental income can be gained if a) you have a tenant (of course) and b) the monthly mortgage payments are less than the rent. For the lender, this is an important aspect of the buy to let mortgage. Lenders now have increasingly complex calculations for working out how much can be borrowed on a buy to let mortgage, taking into account behind the scenes "stress testing", and even now the borrower's tax bracket! Never before have buy to let investors been so badly in need of expert mortgage advice!

The level of rent expected is determined by either the surveyor when he or she values the property or the actual rent if there is a sitting tenant. Mortgage lenders work to their own individual (and often complex!) criteria when calculating how much can be borrowed on a buy to let mortgage. This is because they want to see a "buffer zone", as it can help to cover expenses, rises in interest rates and periods without tenants.

Buy to let mortgages normally have a loan to value maximum of 75%. However, it is now possible to borrow 80% with some lending institutions.

The normal criteria of status remain the same in terms of the borrower's credit worthiness. In some cases, the lender will ask for a minimum amount of personal income to be shown (but not all).

A buy to let mortgage can also be arranged in a limited company's name, and this may prove to be more tax advantageous. If you have a property portfolio you wish to remortgage - please get in touch.

Below market value (BVM) properties are a popular way of acquiring rental investment properties with little or no cash provided on the part of the buyer. They work by utilizing the equity in the BMV property to obtain a buy to let mortgage with a reduced cash deposit.

This system often involves bridging finance to buy the property in the first instance and you often have to own the property for six months before you can remortgage. Please call us for more details.

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Building 3, City West Business Park,
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