Although house prices have either fallen or remained stagnant for almost four years, the buy to let market has never been so lucrative. The simple reason for this is that following the credit crunch and the collapse of various institutions, banks were encouraged to withdraw any mortgage products that offered a high loan to value (LTV). In essence, this means that buyers need a deposit of at least 15% to be eligible for a mortgage. While this mainly concerns the bottom of the market and first time buyers, it is these buyers who would normally start a chain. With no first time buyers to start the chain, people further up the property ladder cannot move, leading to sluggish house prices.
So with first time buyers priced out of buying, the rental market is booming. And with house prices going nowhere, it has almost never been cheaper to purchase a buy to let. Whether you’re a seasoned investor or you are turning to the rental market for the first time, you will look to ask yourself the same questions. Will my money be safe in the buy to let market? Will I be eligible for a buy to let mortgage? What is the difference between a buy to let mortgage and a regular mortgage? Where can I find the best buy to let mortgages?
Although nothing is guaranteed, the rental market is a tried and tested investment method. Rental returns aren’t necessarily linked to house prices – they are more closely linked to inflation – so you could potentially even make money in a falling market. The unavoidable downside is that there will inevitably be times when your property is empty and so there will be no money will coming in.
Buy to let mortgages are essentially the same as regular mortgages, the only real difference being that the mortgage is for a house you will not be living in. You can read more details here too on ‘Buying a second home‘. When it comes to eligibility, you may find the loan to value is a lot lower than you would expect for a regular mortgage so be prepared to shop around if you don’t have a large deposit.
The best deals currently belong to Skipton Building Society who have two of the top ten deals. With an LTV of 70% you can expect to pay either 4.69% APR fixed for three years or 4.89% fixed for five years. The best single deal on the market today is with Principality Building Society who for a 60% LTV will charge only 3.89% fixed for two years.