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Funding Buy to Let Investments Presentation by Steve Straw Director

Funding Buy to Let Investments Presentation by Steve Straw Director. Agenda. Who we are. What we do. Ways of financing investment property. Features of a Buy to Let Mortgage – what is different to a normal mortgage? Assessing affordability.

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Funding Buy to Let Investments Presentation by Steve Straw Director

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  1. Funding Buy to Let InvestmentsPresentation bySteve StrawDirector

  2. Agenda • Who we are. • What we do. • Ways of financing investment property. • Features of a Buy to Let Mortgage – what is different to a normal mortgage? • Assessing affordability. • Finding the right mortgage and other financial products. • Why use a Mortgage Adviser? • Multiple Property Landlords. • Protecting against the loss of rental income. • Planning your Exit Strategy.

  3. Who are we? • T&R have been established since 1982. • We are a locally based business, with 15 staff, including 6 Consultants. • Our Consultants are professionally qualified to give advice in regulated areas of financial advice. • Recently relocated to Oakwood Road, Off Doddington Road, Lincoln, with modern premises and parking available. ‘We are passionate about helping you achieve your financial goals’.

  4. What do we do? • Our core areas of advice include: • Investments • Pensions and Retirement Planning • Non-investment Life Protection, and • Mortgages • As well as providing advice, we essentially help clients by setting plans in place, to give them a clear understanding of what they want to achieve in the coming years. • We help both private and corporate clients in these specific areas of financial advice. • We are a fully independent IFA and offer whole of the market.

  5. Some Statistics • In the 2nd quarter of 2013, lenders advanced 40,000 mortgages worth £5.1 million: number and value the highest since 3rd quarter of 2008. • Year-on-year (2013 & 2012): Buy to Let lending is 19% higher by volume, and 31% higher by value. • Lending for house purchase: accounted for more than half the But to Let loans advanced. • Re-mortgaging was stronger, reflecting in improved conditions in funding markets and more widespread availability of mortgage credit. • Buy to Let mortgages in arrears (over 3 mths): down from 9.7% in 2012 to 8.4% in 2013. Possession rate down from 0.11% to 0.09%. • Statistics from Council of Mortgage lenders: incl. banks, building societies, and other lenders, who represent over 95% of all residential lending. • CML Buy to Let data is issued quarterly: third quarter is next issued 14/11/2013.

  6. Ways of Financing an Investment Property • Buying the property outright • Property Portfolio • Let to Buy In most cases you will need a Buy to Let Mortgage

  7. How does a Buy to Let Mortgage differ from other mortgages? In many ways it doesn’t differ from a residential mortgage. Subject to same credit checks, mthly repayments needed, agreed term of mortgage, property acts as security , fixed and variable rates available.

  8. Assessing Affordability • Affordability is typically linked to rental income calculations. • Rental income is often based on 125% of mortgage payment. • Use a ‘stressed’ interest rate. • Be aware of up front costs when considering the mortgage.

  9. What rental income do I need? Example: • Property value/purchase price £125,000. • The lender’s stressed interest rate is 5%, and the mortgage lender’s rental income requirement is 125%: rent must equal 125% of mortgage costs. • Maximum loan is say 75%, £93,750, deposit £31,250. Therefore £93,750 x 5% (stressed interest rate) = £4,687/12 = £390.62 • The minimum rental income is: £390.62 x 125% = £488.28 per month.

  10. Finding the right mortgage and other financial products • Make sure you shop around. • Use a specialist Buy to Let Mortgage Broker or Financial Adviser, IFA (such as Thompson & Richardson). • Look in best buy tables, online or the press. • Check different lenders’ own websites. • The costs.

  11. Why use a Mortgage Adviser or IFA? • Qualified • Protection • Whole of Market • Research • Value of advice • Full Service

  12. Multiple Property Landlords • For Property Landlords building a portfolio of properties. • Taking professional advice – why? • Limited company or individual? • Sourcing finance. • Negotiate terms.

  13. Protecting against the loss of rental income • Consider the fall in house prices, rental incomes, and changes in interest rates. • ‘Biggest fear’ - if the property sits empty. • Use a licensed ARLA agent to find the right tenants. • Take out Landlord Insurance.

  14. Planning your Exit Strategy • Buy to Let is a long term investment. • Exit strategy is determined by: investing for rental returns (as an income) or capital growth. • Choose the right time to exit: when could be important. • Consider the repayment of your Buy to Let mortgage.

  15. Summary: Top 5 Tips for Borrowing • Do your homework on affordability. • Minimum deposit but also a ‘buffer’. • Take advice to secure the most suitable Buy to Let product. • Interest only is best but consider repayment at the end: Your strategy? • Use a licensed Managing Agent

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