Depending on who you believe the property prices are either going to tumble any time soon or prices are going to keep rising at their current rate. Here in the docklands I have seen prices rise at a significant rate and recent research suggests that in the area prices have risen by around 10 to 12 percent in the last twelve months alone.
More and more people are looking at buy to let investments as a way to build up a little nest egg for their retirement and with more growth forecasted for next year as well it could still be a good time to enter the market. But how does buy to let concept work?
The buy to let concept is ten years old now and historically over that time investors have made more returns using this method of investment than any other available on the market. However, what must be remembered is that research must be done whenever buying a property. The reason I say this is that I find there is a general feeling that if you buy property you will always make money. This is not always the case as there are bad investments out there as well as good ones.
The most common way buy to let mortgages work is that you find a property and you put down a 15% deposit. The mortgage lenders requirement on a buy to let mortgage is not the same as a standard mortgage as they do not focus entirely on your income. What they do require though is that the rental achieved on the property will cover at least 125% of the interest only of the mortgage. To make it easier you can look at the example below.
| Purchase price |
£300,000 |
| Deposit @15% |
£45,000 |
| Mortgage amount |
£255,000 |
| Monthly mortgage payment* |
£1049.21 |
| Rental amount needed |
£1311.51 |
*Based on an interest only rate of 4.84%. The overall cost for comparison is APR 6.6%.
The buy to let mortgage market is becoming more and more competitive and as new lenders are entering the market conditions of mortgages are changing. We can now offer our clients the following:
- 100% buy to let mortgages
- 100% rental cover on mortgages
These new deals are allowing new investors to enter the market without the need for a healthy deposit or the need for the rental to cover the mortgage payment by 125%.
If you would like to ask any questions about mortgages or building your own portfolio then please email me at the following address: propertymart@themortgagetimes.com
James Smith is a marketing executive for Mortgage Minds.
Mortgage Minds is an independent mortgage proposition, a division of the Mortgage Times Group Limited. The Mortgage Times Group Limited are authorised and Regulated by the Financial Services Authority (303007)
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