Jeni explains how reviewing the financing of your buy to let properties could save you money and help you to expand your portfolio. And she offers you a complimentary review...
Many landlords last performed a review of their property portfolio before the credit crunch, when money was cheap and easy. Many now believe they have ample equity but think it can’t be realised. Many think that to refinance away from low reversion rates would be fiscal suicide. Are they right? Well, there’s a way to find out...
Let us review your property portfolio
FREE OF CHARGE and WITHOUT OBLIGATION!
Simply download and complete the Property Portfolio Review spreadsheet and return it to us.
If you have your own spreadsheet, don’t’ waste time re-entering the details, just send us yours instead. We’ll then analyse the information and give you a clear picture of your investment finance together with recommendations on how to proceed and keep your investment strategy on track.
Specifically we'll help you find out if you can:
- Save time and money - by switching mortgage provider
- Unlock any untapped equity - to buy more rental property
If you prefer to work in paper, you can post us the information too - see the details at the very end of this blog.
Think you can’t unlock the capital in your property?
Granted, lending criteria has changed considerably since 2008 but the increase in buy to let mortgage borrowing has been growing year-on-year since 2009 and now accounts for nearly 13% of all mortgage lending. And if you’ve been following our Complex Buy to Let Index, you’ll know that remortgaging currently accounts for more than 71% of all BTL mortgage transactions here at Mortgages for Business in 2014.
So clearly, it is possible to release the equity tied up in your properties because many of you are doing just that. Of course, there may be some sticking points but there are solutions:
Poor credit rating
It’s true that if you have adverse credit, you are less likely to get finance from most of the mainstream buy to let lenders who like borrowers to be squeaky clean. However, there are a few that will look at applications on a case by case basis and take a view. So if you have a few missed payments that were a genuine mistake and have been rectified, it is worth getting in touch to see if we can help.
If your credit rating is very poor, there are still solutions that might work for you. For example, Keystone Buy to Let Mortgages now offers a three year fixed rate loan which not only helps landlords unlock capital and make purchases, it also helps the borrower to repair their credit rating. Of course, as you would expect, the rates are higher than standard buy to let products but cheaper than bridging and they can certainly help you to expand your portfolio.
Income in excess of £25k pa in addition to rent
To many, it does seem odd that in addition to stringent rent to interest stress tests, lots of mainstream buy to let lenders also require borrowers to have an income in excess of £25k pa which is not derived from rent. This can seem particularly harsh to landlords with larger portfolios, whose incomes are only derived from rent. In reality, the majority of mainstream buy to let lenders target landlords with smaller portfolios, who often have a day job too, because they don’t want to be over-exposed to risk on property. Fortunately, there are a number of lenders out there who don’t impose additional income requirements and who like landlords with large property portfolios. The majority of these lenders can only be accessed by intermediaries (including Mortgages for Business of course), so do get in touch to talk through options that might work for you.
Historically, loan facilities secured on portfolios were great for providing financial flexibility in managing property, but recent years have seen banks become more controlling over this method of borrowing, making it more difficult for borrowers to extract capital for redeployment and levying excessive fees. If you have become disenchanted with your loan facility do get in touch, as many landlords now find it more cost effect to close the facility and remortgage each property individually. The rates are better, the fees are less and the opportunities for rapid portfolio expansion are greater.
Is it fiscal suicide to switch from a low reversion rate?
That depends on your appetite for risk and why you want to refinance.
No one really knows when Bank Rate (and therefore mortgage rates) will rise, but right now, buy to let mortgage rates are probably as low as they are going to get. We could see a bit of downward tweaking between now and year end as lenders grapple to meet their 2014 targets but that is likely to be offset by increases – disguised as restructuring - in fees.
If you believe that rises in Bank Rate will start sooner rather than later, then you might want to protect yourself by remortgaging onto a longer term product. For some time now, we have been recommending five year fixed rate buy to let mortgages but there is even a seven year fixed rate out there, if you fancy tying in for longer.
Alternatively, you could sit tight for a bit longer and enjoy the cash flow that usually accompanies the low reversion rate. But remember, the nearer we get to a rise in Bank Rate, the more likely it is that mortgage rates will rise. And when Bank Rate does rise, it’s like to carry on rising for some time and by that stage it will be too late to take advantage of the current crop of competitive rates.
At the end of the day only you can decide but we can help you monitor market prices and changes, so do sign up to our newsletter.
The main reason for refinancing buy to let property is to realise the equity in order to make further property investments. And with demand for rental property showing no signs of abating, savvy landlords are employing this strategy to expand their portfolios.
Post your Property Portfolio Review forms to:
Mortgages for Business
17 Kings Hill Avenue
Kent ME19 4UA
Mortgages for Business
Suite 1a, Dean Row Court
Dean Row Road
Cheshire SK9 2TB
And if you don’t want to email or post, then pick up the phone and give us a call on 0345 345 6788.
We look forward to helping.