Despite the uncertainty in the housing market, the prospect of buying a second property – or perhaps a third, fourth or fifth – to rent out is still attractive to a lot of people. Recent research comparing the England and London property rental sector with world economies places England above 159 nations – specifically, between Ethiopia and Sri Lanka. London alone, where the sector is worth £21 billion annually, would be placed above 124 countries, sitting above North Korea but behind Latvia. And with home ownership for first time buyers still a pinch-point for the market in spite of a number of High Street lenders recently announcing attractive mortgage products for first-time-buyers, the rental market is expected to continue to grow. There are, of course, considerations that any prospective landlord would need to consider carefully. As Money Week noted recently, changes to Stamp Duty, mortgage interest relief and lettings agency fees , have put challenges in the paths of amateur landlords who may otherwise have been attracted to ‘dabble’ in property as a source of income. That said, profitability is also partly down to that old estate agency maxim of location, location, location. If you own a rental property in a highly desirable area, particularly in London, it’s likely to be easier to let at a good rent. That doesn’t guarantee profit, of course, but a property in the right place is an obvious must if you’re to have any hope of making a decent yield on your investment. So, if you’re considering a buy-to-let investment and we assume you’ve got the basics right, what are the mistakes you need to avoid? Not minding your own business In the end, a rental property is a business. It may not be a business with massive turnover or huge margin, but at the most granular level, it needs to at least break even. That means being prudent over what you invest in it – both in terms of real costs and your own time and effort, both of which have a value. If decorating, building works or ground and garden maintenance is needed, that will eat into your margin, so be pragmatic about where and what you invest. If a cheaper own-brand paint will serve just as well as the high-end stuff, that’s what you should consider using. Similarly, if the time and effort you spend dealing with the management of the property is going materially reduce the amount you can earn from your day job, that needs to be factored in, too. There are a lot of landlords out there who failed as property entrepreneurs because they didn’t realise or remember their buy-to-let was a business – but if you keep the business side of your investment in mind, you’re less likely to become one of them. Failing to understand your responsibilities As a landlord, you’ll have a lot of statutory responsibilities and if you don’t understand what you have to do (and what you don’t have to do), life can get tricky. Your contract with your tenant and the rental agreement they have with you depends on both of you doing certain things. Among many other things, you’ll need to get certificates and undertake responsibilities for certain repairs – your tenants will be required to give you access on an agreed arrangement, pay the rent on time and keep the property in good order. If you – or they – fail to do what you’re required by legislation to do, someone could be in breach of contract. Failing to get the right cover This is a crucial thing to get right. The simple fact is that ordinary household insurance is highly unlikely to cover your property. Because your property is occupied by people who may not treat it with the same respect you would as the owner, and because there’s a chance it will be vacant at times (for example, between lets), insurers consider buy-to-let property to be a different type of risk to that of an owner-occupied home. You’ll need to get specialist landlord insurance to cover your building (and, if you’re letting a furnished property, its contents – if it’s unfurnished, the tenant will be responsible for insuring their own possessions). We can help you to find a suitable product that offers you the best cover for your needs. Call us on the number below to speak to a member of our friendly team and find out more. Not planning to plan Inevitably, a buy-to-let will generate expense. It’s likely you’ll have to do repairs to the property that you may choose not to do – or to delay – if it were your main residence. The boiler might need to be replaced. The property will almost certainly need redecorating from time to time – and probably more frequently than you would do if you were living in it. Most of the expenses you currently associate with your own home will crop up in some form at your buy-to-let, so it makes sense to ensure you’re budgeting for those over the long-term so you aren’t hit with any nasty surprises. Getting your buy-to-let investment right doesn’t need to be an arduous process – and it can save you money and time in the long run if you start as you mean to go on. If you’re considering buying an investment property and want to generate an income from it, come and talk to us about how our expert mortgage and insurance advice can give you the peace of mind of knowing you’re set up for the best chance of success. Want to know how other clients felt about working with Oportfolio? Watch Gus and Selena’s video story! To find out more about our friendly and professional mortgage service, fees and what we can do to help make sure you’re not paying over the odds for your mortgage, why not visit www.oportfolio.co.uk or give us a call on 020 7371 5063. Your property may be repossessed if you do not keep up repayments on your mortgage. Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.
The Easter holidays and the enforced suspension of Parliamentary business gave us all a welcome break from the wall-to-wall coverage of the ongoing Brexit saga – but with return of MPs to Westminster came the return of the uncertainty that has dogged the process for much of the past year. Lack of certainty is always unsettling and is always more likely to provoke stagnation than it is growth. When questions arise over the future of a football club’s manager or its star player, the history books suggest form dips and nervousness prevails until the situation is resolved. The same is true in politics, and the unsettling effect of the protracted Brexit talks across all sectors from business to leisure and travel to finance has been well-documented as 'business as usual' has spiralled into a holding pattern while we wait for some clarity. The same is true in the housing market. Latest analysis from Which? suggests that house price growth has declined slightly since a period of stagnation immediately after the Referendum. Transactions, though, were slightly up in February of this year than in 2018. Somewhat simplistically, what that means is that right now housing is a buyer’s market, with the increase in transactions suggesting there’s a level of opportunism at play in a falling market. To what extent, though, can the state of the UK property market in 2019 be attributed to the uncertainty created by Brexit? The answer is undoubtedly that it has played a part. Many property professionals and market commentators, including the Royal Institute of Chartered Surveyors, believe the ongoing deadlock in Parliament is dragging the housing market into a slump, but there are also those who believe some of the trends we’re seeing are a product of the market undergoing a long-overdue correction. If true, then that could have the beneficial side-effect of serving to make property ownership more accessible to first time buyers – something that has been a concern to many people for some time. It’s certainly true that many people are playing a ‘wait and see’ game and it’s likely that this is more to do with the terms of our departure – in other words, whether Britain leaves Europe with or without a deal – and how interest rates might be affected by that. The Bank of England Governor, Mark Carney, has previously warned that a no-deal Brexit will have a significant negative impact on the UK economy, so it’s hardly surprising that potential house buyers might be cautious about taking the plunge until there’s confidence around the stability of interest rates. But that’s not to say there aren’t deals to be had in the market or that buying a house would necessarily be a rash move at this stage. Clearly, affordability looks different for everyone and regardless of the political climate we’d always advise would-be buyers to consider carefully the potential consequences of what is, for most people, the most expensive purchase they’ll ever make. But for those who do enjoy the confidence of being able to buy, there are some good fixed rate mortgage deals out there – many of them for 5 years or longer – which would offer some insulation against any initial rise in interest rates as a result of leaving the EU. It’s hard to imagine that anyone would argue the Brexit process has been a good thing, but although it’s left a mark on the housing market, there are still good deals to be done for many people who are looking to move. If you’re one of them, why not come and talk to us about how our award-winning mortgage advice could help to see you into your dream home this summer? Want to know how other clients felt about working with Oportfolio? Watch Gus and Selena’s video story! To find out more about our friendly and professional mortgage service, fees and what we can do to help make sure you’re not paying over the odds for your mortgage, why not visit www.oportfolio.co.uk or give us a call on 020 7371 5063. Your property may be repossessed if you do not keep up repayments on your mortgage. Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.
If you search on the web for advice on the things you should do when choosing a mortgage, you’ll get a lot of information back. Some of it’s good, some of it not so good. But as important, if not more so, is what you should avoid doing. Here’s our guide to the mistakes you’d do well to avoid making. Don’t approach your hunt for a mortgage in the same way you would if you were buying a washing machine We know that sounds obvious, but you’d be surprised at the almost laissez-faire way a good many people approach the business of securing the finance to buy their home. Put simply, buying a home is a huge investment – and almost certainly the largest single purchase you’ll have made in your life at that point. It’s fine to buy a washing machine from Amazon or another online retailer. If it doesn’t work, you send it back. If you realise there was a better model you could have bought, it’s not a calamitous financial mistake to have to live with. Choose the wrong mortgage provider or product, however, and you could be paying for it – literally – for years. Don’t obsess about the interest rate We’ve said this before, but it’s worth repeating. If the only thing you’re looking at is the interest rate, then the chances are you’re missing a trick. Yes, how much you’re going to pay each month is important and so that means the rate is a factor in your decision – but it’s not the only factor. Is the rate fixed or variable? If it’s fixed, how long is it fixed for? Are there early exit fees? Is there an arrangement fee? Will you be able to overpay if you want to, and if so, by how much? Just as importantly, is the mortgage provider reputable and do you believe you’ll get good support and care during the lifetime of the loan? The days of personal 121 contact with an account manager may be over, but your relationship with your lender remains just as important today as it always did. Don’t chase lower rates at the expense of lender reputation Even if you do put a lot of store by the interest rates on offer from lenders, they don’t always tell the whole story. If you saw what looked like two very similar cars on offer from two different dealers, and one was significantly cheaper than the other, you might be tempted to buy the cheaper of the two. But it’s always worth taking pause for thought. There could be legitimate reasons for two apparently identical mortgages being offered at different rates of interest. It could be that one lender is squeezing as much margin out of the loan as possible to maximise profit. Equally, it might be that they’re a bigger, more well-established and reputable lender, with bigger overheads and a better overall service. Don’t take a mortgage from an unregulated lender If you do nothing else (and we hope you’ll do a lot more than this), don’t take a mortgage with an unregulated lender, because when things go wrong, you have no easy recourse to get them put right. Unregulated lenders aren’t subject to the same lending standards as regulated banks and building societies and don’t offer the same protection. Do your homework and ensure your lender is reputable and regulated by the Financial Conduct Authority. If you’re in any doubt at all, hit the pause button and reconsider. Use a professional mortgage broker If you only follow this final – and, we’d obviously argue, most important - rule, you’ll also avoid making the first four mistakes, too. A good, professional mortgage broker will also be regulated – giving you protection against bad advice – and will know the market inside out. They’ll know what deals are available, what products will best suit your circumstances (not just today, but in the longer term, based on your priorities and ambitions) and the lenders who can offer you the best options for buying your home. At Oportfolio, we’re mortgage experts regulated by FCA and with years of success behind us – so if you’re ready to take the next step in your property journey, we’re ready to help you. Want to know how other clients felt about working with Oportfolio? Watch Gus and Selena’s video story! To find out more about our friendly and professional mortgage service, fees and what we can do to help make sure you’re not paying over the odds for your mortgage, why not visit www.oportfolio.co.uk or give us a call on 020 7371 5063. Your property may be repossessed if you do not keep up repayments on your mortgage. Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.
What size deposit do I need to be able to get a mortgage? It’s a question we hear asked a lot, especially from people who haven’t been through a mortgage application process in a good while and who worry that lenders have changed their policies around what percentage of a property’s value they’re prepared to lend against (the loan to value, or LTV). The simple answer to the question, rather unhelpfully, is that it depends. Following the financial crisis of 2008, lenders – both banks and building societies – were forced by regulators and by the Bank of England to tighten their lending criteria to ensure customers were able to afford to repay the loans they were offered. What that meant in practice was that the majority of mortgage lenders became more risk averse. The days of widespread large multiple lending, for example – where mortgage providers were offering loans calculated at four to six times annual salary – certainly became as rare as hen’s teeth. The previously common 100% mortgage – where a lender would stump up a mortgage to the full purchase price of the property – also became harder to come by (though they have made something of a comeback in the early part of 2019). And, inevitably, there was also an effect on the way lenders viewed the deposits that customers were able to make. But this was less about the amount involved and more about how the level of impact the deposit had on the lending risk concerned. It doesn’t take a degree in economics to be able to understand that a customer who can put down 40% of the value of the property they want to buy is a more attractive proposition than someone who can only get a deposit for 5%. But having a small deposit certainly doesn’t mean there’ll be a problem getting your mortgage application approved. Far from it, in fact. Having any sort of deposit sends a positive message to the mortgage provider that you’re prepared to share the financial risk and that you’ve thought and planned ahead for this moment. That said, some lenders will have limits on the LTV they will accept and so to that extent, there may well be a minimum deposit a lender would expect to see for any given mortgage product. However, assuming you’ve cleared any LTV hurdle, of far more interest to a lender in determining whether your application is approved or not will be your ability to afford the resulting repayments. Remember, too, that the more you’re able to put down, the less you’ll be borrowing and the lower your repayments will be (or, depending on your priorities, the shorter the mortgage term will be). If you already own your home, then the equity in it will probably make up all or part of any deposit you intend to put down. But remember, you’re likely to also have to find money to pay Stamp Duty, legal fees, surveyor fees and any other costs associated with your move. And if you plan to do any renovation work on your new home, you’ll need to consider how you’ll be paying for that, too. Talking to a professional mortgage broker like Oportfolio can be really useful in helping you to plan how to arrange your move from a financial point of view. So if you’re looking at a move during 2019, why not get in touch and have a chat with one of our friendly team? Want to know how other people feel about working with Oportfolio to buy their dream property? Watch Gus and Selena’s video story! To find out more about our friendly and professional mortgage service, fees and what we can do to help make sure you’re not paying over the odds for your mortgage, why not visit www.oportfolio.co.uk or give us a call on 020 7371 5063. Your property may be repossessed if you do not keep up repayments on your mortgage. Oportfolio Ltd fees are payable on application. We charge a broker fee for property purchases of £495 and a remortgage/further advance fee of £395. Our product transfer fee is £295.
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