why are btl mortgages so expensive??

new_home_owner_3

Ive started to rent our property out and i got consent to let from my mortgage provider, now me and the wife are thinking about getting another one but the fees are massive and the rates are not really that good.

Having took into acount the massive fees we will not enter back into the market yet, how long do you people think the btl mortgage fees will stay as high as what they are now? we are in a lucky position at the moment as we have a five year fixed deal on our current btl and that was secured on a residential rate.

The thing is there are some good properties coming up its just the massive fees that are putting us off.

what do you guys think?

Let_Us_See

Simple. Due to scarcity of lending funds, risk involved, semi-commercial aspect and lack of BTL lenders in market place. Very much a lender driven market with too few lenders trying to service BTL purchases and re-mortgages that they can dictate fees. Will fees reduce? Not for a long time - if ever. The good days (or follish days?) have gone.

Conrad

Won't change for a while. No one particularly wants buy to let business, afterall it's the sector that sent lenders such as Bradford & Bingley, under.

The fees are merely a function of supply and demand and plenty are paying those fees so there is no incentive to reduce. Furthermore the B2L lenders are inundated with new business and reducing costs would merely send service levels through the floor.

As you say it's probably a good time to buy, so you have to balance the high entry costs against potential low buying prices.

By the time the mortgages get more competitive, prices will have gone up.

I guess your'e in it for the long term. Imagine the property value in 30 years time and imagine how much rent you'll earn in a lifetime. Consider the fees in light of all that. Personaly I don't get emmotionaly hung up on fees and things, it's merely a cost of doing business in the property world.

Conrad

BTW, the rates are great in view of market risk from a lenders perspective. They won't get any cheaper for a long time. Remember this is business finance not a resi mortgage so comparisons are futile.

Gorgeous_George

The risks are different with BTL but IMHO interest rates for BTL purchases are low. How much is your house worth and what is the rent?

I know a property that is on the market for £58K that would command £5K annual rent quite comfortably. It is so close to meeting my rule-of-thumb requirements.

GG

new_home_owner_3

I suppose your right i think we will stick with the one for few years and see how it goes, we was never going to become landlords, but having done the one and seeing what you can get back rent wise, whilst hanging onto something that future value should go up hopefully will be a good investment.

The only thing im gutted about is not doing it sooner.

george, our house is not the ideal btl property and we could get 100 pound less on a property that is worth just over half the price of what our is worth.

At the moment our mortgage is 350 pound and the rental income is 650 pound, we are just banking the profit, its worked out well for us as we only paid 65,000 for the property 10 years ago.

Its gave us some disposable income, and hopefully we will get that for the next 5 years, after that who knows but if house prices have gone up im sure rent will aswell.

Gorgeous_George

Don't forget to pay tax on your profits.

Mathematically, you should probably sell it and buy the one over the road.

Prices may never recover.

Good luck. Pick your tenants wisely and treat them well.

GG

new_home_owner_3

Gorgeous_George wrote: »

Don't forget to pay tax on your profits.

Mathematically, you should probably sell it and buy the one over the road.



GG

ive kept everything in the one acount and ill will be paying the tax, mathamatically i would be better off buying one over the road, well its the next village, but where it is houses are quite sort after.

When we advertised it we had loads of interest and must have had over 30 enquiries.

My friend buys low priced houses between 70-90,000 and rents them to dhs and he gets 550 pound a month, maybe ill do that in the future.

At the moment we are happy knowing we will not really have a problem finding tenants.

luckyfool

The cost of BTL deals is unlikely to improve any time soon, so the time of "remortgaging" every couple of years on Buy to Lets is over. Even with a high setup fee, just make sure you are taking a deal with a competitive long term rate or reversionary rate and buy it for the long term.

dimbo61

dhs now pay rent direct to tenant and not landlord so your friend could come unstuck if tenant does not pay his/her rent so BEWARE !

Thrugelmir

BTL while a mortgage in type is actually a commercial loan.

The fees and interest charged on the product reflect the risk. In that you will need to generate sufficent income to service the debt, and over time make sufficent after tax profit to repay the capital debt.

Historically "BTL" mortgages were priced at least a full 1% above a normal residential mortgage. So factoring in the income tax due on the net rental income. The returns weren't that great (in general terms) as compared to other investments. Its only in recent years with the increase in capital values has BTL become a fad.

The fact that gets overlooked. Is that you need an increasing rental yield to service the capital debt repayment. In broad terms in the next few years disposable income is likely to reduce so rents are also unlikely to increase substantially.

Also if changes to capital gains tax happen in the next budget. The attraction of new investment into BTL will accordingly reduce. Possibly also changing the lenders views also.