What is the best route to obtain cheapest buy to let mortgage

tony3

I would appreciate advice on how to go about searching for the best buy to let mortgage? This is my first attempt at investing in property! Should you use more than one broker?

sarkin

There is no cheap way, You need minimum 10% deposit and the rental income must be at least 100% to 125% of the mortgage payment i,e mortgage 100 a month rent 100 to 125 a month.

I would say stay clear of buy to let as the returns are looking very poor, with a rental yield of 5-6% you would make more money in a high interest savings account. I am sure someone will come along and say that they are making money but in my arear Bournemouth, there are hundreds of property up for rent the whole place is saturated.

AndrewSmith

Interest rates rising and rental income dropping.

I agree completely that the buy to let market is saturated, hence the number of landlords selling up now.

Jon_Davies

Rates are rising (IMHO they are close to a peak now though) but there is no evidence that rental income is dropping. Stagnating in some areas, but not dropping.

It's all about location - some areas are dead as a dodo, some pulling excellent yields. I've personally broked more than one deal in the last few months that are approaching double-digit yield! Commercial premises with flats above are pulling especially good numbers.

sarkin

Jon you are right there is money to be made in the right area and find the right property but this guy is FTB at BTL not an experienced landlord with a keen eye for a deal, he could end up with a new build. As for rates near the peak the money markets are already pricing in rates at 6% check the other threads. IMHO rates wil hit 6% year end and then we will be into the new year with another round of pay settlements. If the big unions ask for more money then this will add to inflation and rates will continue to rise.

Vincenzo

Hey Tony 3,

I agree with all the previous replies and as a valuer I would definitely recommend caution.

Property investment has a high initial cost but is popular because of the effects of gearing. While the yield may only be 5%, when you are only investing 10% of the purchse price (plus costs), your real return will be much higher, especially when you take into account the increase in capital value.

E.G. Ignoring costs, if you buy a property for £200,000 and invest £20,000 cash. An annual return (capital and rental) of 10% is £20,000. Therefore you have a 100% return on your investment.

The problem now is that the rents often do not cover the costs of the mortage, management and maintenance of the property.

One way of mitigating your risk slightly and saving on costs (and tax in the long run) is to 'let to buy'. Depending on where you are on the property ladder, this may be a good option for you. I have done this each time I have moved which has many benefits:

1. You are a more attractive purchaser as you have nothing to sell
2. You are under no time pressure to find a property from your buyers
3. You have no estate agent fees to pay for selling
4. Depending on how much cash you need to release to purchase your onward you can ensure that the mortgage payments are at a sensible level and easily covered by the rent, taking into account voids etc.

Anyway, good luck with it...

tony3

Thankyou Vincenzo for your reply.