How to make buy to let mortgages work for you

With mortgage rates hitting record lows in the last few months, many property investors are considering finance as an option for their next buy to let investment to help maximise their returns.

Graham Davidson
9th June 2015
To Let 3

Research this month from the Council of Mortgage Lenders (CML) highlighted heightened lending rates to landlords with 18,200 buy to let loans recorded in March alone, with over half of this figure accounting for remortgage loans. So what is driving people to use mortgages now more than ever?

Timing is everything in buy to let and on the cusp of a boom period, activity is bound to increase. Sequre currently average around 4,500 enquiries each month from investors looking to put their capital into property while prices are still increasing. The added advantage of using a loan to purchase means their investment remains relatively low risk compared to many others on the market, whilst investors will reap the returns for many years to come.  

Things to consider when opting for a buy to let mortgage:

Loans vs Cash: Some first time investors may be reluctant to take out another mortgage, especially if they have already finished paying one off on their own property. It’s important to view buy to let as a business, and while cash buyers will still see returns, borrowed capital allows for leveraging which allows investors to fully maximise their assets for high returns and capital gain. It is important to remember that the rental income from the properties will be used to pay the mortgage repayments so whilst you are borrowing money, you are also creating income which will cover the cost of borrowing.

Leveraging: Sometimes known as gearing, is a technique used to multiply gains by buying more assets by using borrowed funds, leveraging allows investors to benefit from house prices increasing by using borrowed capital. For example, capital of £100,000 could buy one property outright, but spread across four properties (using £25,000 minimum buy to let deposit per property and borrowing the balance), an investor gains from both a greater rental income profit and four times the capital growth for the same amount of cash.

Mortgage Deals: Each lender will have slightly different guidelines when it comes to a mortgage approval so it is wise to speak to a financial professional and shop around to get the best offer that suits your financial needs. Remember that it is often the case that lenders base their decision for buy to let on the property in which you choose to invest in rather than your own personal income, so due diligence is key.

One final word of advice would be to explore all the options available to you. At Sequre, our Property Investment Consultants are fully trained in how leveraging can help an investor maximise their investments and we work closely with mortgage brokers who offer professional advice to investors seeking financial help with buy to let and those who are considering refinancing their homes to expand their portfolio.

Be sure to carry out the essential research on lenders and rates so you can be fully confident in your purchase knowing you have the best deal possible for your investment.  

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