Buy To Let Loans
Buy To Let Loans | A Look At The Benefits For New Landlords
The number of buy to let loans is increasing every year, with phenomenal growth in 2007 with buy to let accounting for a total of 12% of the total mortgage market (11% in 2006). It accounted for £120.4 billion of the mortgage market in 2007. Despite predictions that interest rate rises and new legislation about houses of multiple occupancy (HMOs) would take the heat out of the market, landlords' appetite for buy to let loans remains undimmed.
One of the reasons for the popularity of buy to let loans is that property investment is seen as a tangible form of investment. Unlike investment in stocks and shares, they are an asset you can see and touch - and with any luck there will be some capital growth. This provides a certain level of long term security that might be missing from other forms of investment.
There are many benefits to this type of investment, hence the growth in buy to let loans. For a start, landlords who have taken out buy to let loans have the advantage of getting regular rental income to cover the mortgage payments that need to be made on the loan. Lenders' rental cover requirements should ensure that they are not out of pocket, provided the rent keeps coming in. One of the potential disadvantages for people with buy to let loans is that rental property may stay vacant in between tenancies, leaving them to find the money to service their BTL mortgages.
BTL Mortgage Deals
One good thing about buy to let loans is that they are readily available, with tens of dozens of deals from many of the major lenders. Buy to let loans are available both to employed and self employed landlords and some interest rates are quite attractive. Of course, interest rates may rise as well as fall, so landlords with loans on a variable rate may find that they have to pay more for their BTL mortgage if the Bank of England base rate rises. On the other hand, this could prove an advantage if the base rate falls. Some landlords may prefer to avoid the hassle and go for loans on a fixed rate basis instead.
Once landlords have their loans, there can be a lot of work to do to get their property ready for letting and this can cost quite a bit. In addition to complying with regulations on fire, gas and electrical safety, landlords might also have to renovate and furnish the property. With some loans, conditions are imposed about the management of the property, which means that landlords may have to spend more money on getting a letting agent. However, this could be worth it, as using a letting agent tends to reduce the number of void periods. And there may also be tax deductions on some of the renovation and maintenance costs.
Landlords with buy to let loans confidently expect to make money from capital appreciation. However, this invariably means taking a long term view. In the short term, rental values can fall and property can depreciate, though the long term trend is upward. Landlords need to be ready to ride out any slumps to get the best from their buy to let loans.
