For many investors looking to increase their property portfolio buy-to-let mortgage’s look an attractive with their low interest rates, but there are important factors which need to considered so you do things correctly and don’t come stuck down the line. AFP Partnership are mortgage advisers in Shrewsbury who deal with several leading lenders. This means we are not tied into one lender so we can find our clients the most suitable mortgage for them. We advise many types of clients including First Time Buyers looking for mortgages, Self Employed & Directors and investors who are looking for Buy-to-Let Mortgages. Please call 01743 364377 or send us an email.
Tips For Investors Looking to Investing & Buy-to-Let Mortgages
Buy-to-Let mortgages for investors must be aware that mortgages with low rates can change as the Bank of England will someday increase the interest rate. Investors need to know what they are taking on and whether they can financially support the Buy-to-Let mortgage when the interest rise happens.
Some investors who bought property before 2007 struggled with their repayments when mortgage rates increased but when the rates went down to 0.5% they found themselves in a better position financially. The rates will rise again and we ask any investor to be careful and ask if they could afford the repayments should the Bank of England increase the base rate to 2 or 3%.
We have seen an increase in demand for property rentals over the past 5 or 6 years and with lower interest rates we are seeing more and more property investors come forward.
Buy to Let Mortgages Can Come With Big Fees!
Buy-to-Let investors need to beware of the costs and fees which are added to Buy-to-Let mortgages. These costs can have a huge significance to the overall cost of the mortgage.
The highest fees are normally changed as a % of the loan but flat fees can be high too and vary between £1k-£3k depending on who the mortgage provider is. There are many attractive Buy-to-Let mortgages available on the market and some providers are offering loans as low as 2.49%, however, to secure this deal the investor will need a huge deposit; typically 40%. The fee for this is 2.5%.
To make you aware of the costs; if the loan was for £150,000 there would be a whopping £3,750 fee and a charge for interest of just over £51,650 bringing the total charge to a colossal £55,400!!!!
1. Carry Out Extensive Research & Don’t Jump Straight In
Never jump into any mortgage without carrying out extensive research first. How much do you know about buy-to-let mortgages? Read various blogs, websites and buy newspapers with financial reports and news in them such as The Financial Times, and The Guardian.
A Buy-to-Let might not be right for you; your money could be much better off in a high interest savings account. HSBC have some great deals for the Premier clients and your money could do better cashed with them. They also offer investment opportunities where your money could grow over time and provide you with a better return for your investment. These types of investments can involve some level of risk; however you’re Investment Adviser will talk things through with you and ask you a serious of questions to understand what type of person you are and how much risk you are willing to take. Normally the more risk someone is willing to take the more money they could make, or lose too!
2. Location Location Location
This is a very famous phrase but it’s true. When buying a property it’s all about location, location, location. Just because a property is cheap does not mean it would make a good investment. The same applies for expensive property too.
When looking into property investment you will need to consider:
a) The local schools; where are the nearest and what are they like?
b) Is there public transport; your tenant may not be able to drive and depends on a bus/train. If you buy a property in a remote part of Shropshire and Mid Wales how would your tenant get about if there was no public transport?
c) How far is the nearest town; if your tenant works they would not find it too appealing if they had an hour’s drive into work each morning and an hour’s drive after work.
d) Would you live in the area; if the area is not good enough for you how appealing would it be to someone else?
e) Who is your target market; are you targeting your property to young couples, young families or is your investment property targeting holiday lets?
f) If the above answer is holiday lets; what is nearby for your guests to do to keep them occupied and want to stay at your property?
3. Calculate Your Costs
Before you jump onto RightMove or any other website selling property work out how much things are going cost you. Dust off your calculator and work things out.
Here is a very useful link which will help you with your monthly repayments. Alternatively, please contact AFP Partnership to give you some examples of costs and how much you will be looking to pay on a monthly basis. We can be reached by email or telephone, 01743 364377. We are located in Shrewsbury and available for evening appointments, should you require assistance after working hours.
4. Speak to a Mortgage Advisers to Search For The Best Buy-to-Let Mortgage Deal
It’s really important that you get the best deal and not just to walk into the first Bank or Building Society and sign up for the first offer which comes your way. There are several mortgage providers you could speak with and to see what they have to offer.
Searching for a suitable Buy-to-Let mortgage can take time. Mortgage lenders usually require further information during the application so there might be several emails or phone conversations to have with them; something which can cause delay to an application. It is especially difficult if the applicant is working during the day and can only answer their questions and respond to them after working hours.
AFP Partnership mortgage advisers can help with this for you, search for the best deal and start the application on your behalf. Let us take the stress away for you and deal with the mortgage provider directly. We can normally get a better deal too!
5. Additional Costs
Once you know your target market and the type of tenant you want to attract you will need to think about your tenant and what they need. Is your property going to be furnished or unfurnished? Kitchens and bathroom suites can vary in price so you will need to shop around for the best deal.
You will need to think about decorating the property though so it appeals.
If you are targeting young professionals the property will need to be modern and have some style but nothing too glamorous. If your property is geared for students your property will need to simple but clean.
If you are renting to families they will typically have all of the own belongings and furniture.
Does your property have electric, water, gas and a phone line connected? A connection fee may be required so please bare this mind.
All of the above are additional costs which will need to be equated for and some investors can forget about these additions which can mount up.