In recent times, the buy-to-let industry has come under a bit of pressure following the following some policy changes and other global factors. Non
In recent times, the buy-to-let industry has come under a bit of pressure following the following some policy changes and other global factors.
Nonetheless, many investors are choosing to see the positive side of the market during this period of favourable interest rates. In the UK, new tax policies may have increased entry costs, but owning a rental property can still pay off.
Why own a rental property?
A buy-to-let property can be a good income investment for those savvy enough to raise significant deposit. Especially in a time of stock market fluctuations and attractive savings rates. If you have a single income channel, being a landlord can add to your monthly revenue.
What if you don’t have enough money to buy a rental property? You can get a loan, but here are some things you need to know first.
Make a considerable down payment
A mortgage insurance won’t be enough to cover an investment property, so you will need to provide at least 20% down payment to secure traditional funding. If you can put 25% down, you could even negotiate a better rate. Consider the long-term benefits.
Be a “confident” borrower
While factors such as loan-to-value ratio and lender’s policies may affect the terms of securing a loan for your investment property, knowing that you have a good credit score is a confidence booster. According to Experian, a good credit score is above 880. With this, you can get a lower interest rate. However, it doesn’t mean you won’t get a loan if your score is lower. Your interest rate will only be higher.
Avoid big banks
If your deposit is not quite as large as it should be or if you have other extenuating conditions, consider seeking alternative financing options. Besides, many big banks will request huge collaterals to cover loans in above 75% of the total price of the property.
According to an expert at www.ukpropertyfinance.co.uk, when applying for development finance, one of the lender’s main considerations is your ability to pay back. “They will want to know what security assets you have and proof of the project’s feasibility,” he says.
Consider using owner financing
In the days when almost anybody could get a bank loan, requesting for owner financing would trigger suspicion among some sellers. However, due to tightening of credit, it is a more acceptable practice.
If you decide to go this route, it is advisable to have a strong game plan. Let your lender know the amount you want to begin with and state your terms clearly.
If you want a good property that will pay off handsomely, consider the location and the type of property to buy. Of course, this will affect the loan amount, but it will pay off in the long term if you choose wisely.
Think about selecting developing areas; new establishments, thriving work environments and other factors can affect the rates in future.
The journey to becoming a landlord can be challenging, but if you apply these tips, the route will be easier.