Podcast Summary
Mortgage options for expats are improving: Competition in personal buy-to-let market leads to more lenders offering decent rates and fees to expats, expanding access to mortgages and making it easier to invest in property
Mortgage options for expats are improving, with more lenders entering the market and offering decent rates and fees. This is due to increased competition in the personal buy-to-let market, as more investors shift to limited companies. As a result, lenders are reaching out to previously ignored segments, including expats. Additionally, mortgage lenders are relaxing their criteria or finding ways to get around strict buy-to-let mortgage criteria, such as rental stress tests, to expand their customer base. This trend is important for property investors, particularly those in areas with low yields or high property prices, as it increases access to mortgages and makes it easier to invest in property.
Demonstrating additional income to pass the buy-to-let mortgage stress test: Even if rental income falls short, investors can add income from jobs or other properties to meet mortgage requirements, not affecting their personal finances or subsidizing the property.
Even if your rental income falls short of meeting the mortgage criteria by a certain amount, you can still demonstrate additional income from your day job or other properties to meet the requirements. This income doesn't have to be counted towards another mortgage or living expenses, but rather added to the property's value, allowing you to pass the test. Contrary to belief, this does not mean you're subsidizing the property or making a loss, as the stress test rate used is not the actual rate you pay. Lenders' criteria may tighten and then loosen in response to economic conditions, but understanding these cycles can give investors confidence to invest during exciting times. A common myth is that you need to own a home to get a buy-to-let mortgage. While owning a home can provide access to more lenders, it is not a necessity. Dave Cookson from Charles Louis Mortgage Advisors will be joining us to debunk more buy-to-let mortgage myths. Stay tuned!
Largest buy-to-let lenders for individual buyers and options for first-time buyers and landlords: VM Solutions is the largest buy-to-let lender for individuals, while Vida and NatWest cater to first-time buyers and landlords. Rates for individuals without homes can be competitive, around 2-2.5% for individual buy-to-lets and 3-3.5% for limited company buy-to-lets. Lenders require borrowers to own homes to ensure responsible lending and manage risk.
There are various lenders in the market catering to different types of borrowers in the buy-to-let sector, regardless of whether they are owner-occupiers or not. For instance, VM Solutions is the largest buy-to-let lender in the UK for individual buyers, while Vida and NatWest are options for first-time buyers and first-time landlords. Some lenders prefer borrowers who already own properties due to their proven ability to manage finances responsibly. However, it's essential to note that underwriting criteria for first-time buyers and first-time landlords can be a hybrid of residential and buy-to-let properties, focusing on both rental income and personal income. While the choice might be more limited, the rates for individuals without their own homes can still be competitive, around 2-2.5% for individual buy-to-lets and 3-3.5% for limited company buy-to-lets. The motivation for lenders requiring borrowers to own homes is to ensure responsible lending and manage risk, as their mortgage portfolios often reflect this focus.
Myths about mortgage income requirements: There's no minimum income for mortgages; lenders consider various sources. Myths like 6-month ownership rule aren't universal. Consulting experts can help navigate the process.
There is no absolute minimum income requirement to get a mortgage. While some lenders may have a preferred income level, others will accept rental income or income from other sources as the sole income for mortgage approval. It's essential to consult a mortgage adviser to explore options and dispel any myths that may hinder your mortgage application process. Another common myth is the 6-month rule, which states that one must own a property for at least 6 months before remortgaging or applying for a new mortgage. However, this is also not true, and some lenders like Paragon will approve mortgages within 6 months. Overall, having accurate information and consulting experts can help navigate the mortgage application process and overcome potential obstacles.
Bridge financing for property improvements: Investors can use bridge to term financing to bridge the gap between property purchase and long-term refinancing, securing two valuations and mitigating risks
There are different financing options, such as bridge to term, that can help investors increase the value of their properties even if they can't refinance within the typical 6-month window. This type of financing allows investors to bridge the gap between the purchase of a property in need of repairs and the long-term refinancing once the property is ready. By doing so, investors can have peace of mind knowing that they have two valuations from the same company, ensuring a more secure investment. Bridge to term is a less-known but effective solution for those looking to expand their property portfolio while mitigating the risks associated with bridging finance.
Exploring Financing Options for Unique Properties: Mortgage brokers help secure financing for unique properties by matching borrowers with the right lenders, even when traditional options are limited.
There are various financing options available for unique property situations and individual circumstances, even for properties above commercial premises. While some lenders may be hesitant, others like Kevin Lyons are open to financing such properties, albeit with a higher premium. A mortgage broker can help navigate these complex situations by matching the borrower with the right lender for their specific property and personal circumstances. The mortgage industry continues to evolve, with new fields like service departments offering more lending opportunities. So, if you have a niche property or personal situation, it's essential to consult a mortgage broker to ensure a successful financing outcome.
Navigating Rental Stress Tests for Mortgages: Despite rental stress tests, obtaining a mortgage is still possible with a broker's help and different mortgage types
Despite common myths, it's highly unlikely that a mortgage placement will be impossible, even with recent changes like the rental stress tests. These tests, introduced to ensure borrowers could still afford their mortgage payments after tax changes, have been restrictive but not impossible to navigate. Lenders have adapted by allowing "top slicing," which allows borrowers to use a portion of their other income to meet the higher rental requirements. Additionally, different types of mortgages, like five-year fixes, have lower rental stress calculations, increasing the chances of obtaining the desired loan amount or LTV. Overall, having a broker who is willing to help and problem-solve is crucial in securing a mortgage. The rental stress tests may seem daunting, but they are not insurmountable.
Changes in the landscape for limited company buy-to-let mortgages: Competitive rates and increased tax efficiency make limited company buy-to-lets an attractive option for investors. Rates have dropped below 3%, and arrangement fees are reaching 0. This shift is due to increased competition, new players, and influx of funds.
The landscape for limited company buy-to-let mortgages has significantly changed, offering more tax efficiency and competitive rates for investors. Contrary to popular belief, there is a growing selection of lenders and options available, with rates dropping below 3% and arrangement fees reaching 0 in some cases. This shift is due to increased competition, the entry of new players like LendingVest and Land Bank, and the influx of funds into the limited company buy-to-let market. Although there is still room for improvement in terms of service, the choice is getting closer to that of the individual buy-to-let market and is continuously growing.
Staying Informed and Working with Knowledgeable Brokers in the Evolving Mortgage Market: Stay updated on market trends and work with knowledgeable brokers to access the best mortgage products, debunking common property investment myths and leveraging the power of information to build a successful property portfolio.
The mortgage market is constantly evolving, and it's essential for investors to stay informed and work with knowledgeable brokers to access the best products. Lenders follow market trends and demand, leading to an increase in offerings for areas like serviced accommodation. Myths surrounding property investment may have been true at one point but can quickly change, making it crucial to keep up-to-date. Pre-2007, the market was more stable, but post-2007, legislative changes and new tax rules have significantly impacted the market's growth. Leverage is a crucial aspect of property investing, and securing the best mortgage product can make a significant difference over the lifetime of the loan. Dave, a mortgage expert, emphasized the importance of staying informed and debunked common property investment myths during the discussion. It's always inspiring to hear success stories from individuals who have put the information shared into action, like Ally Temple, who credits the podcasts and books for her property success and is now set to expand her portfolio. If you're an action-taker, share your story with us on social media, the forum, or through a review.
Buying your first property: Debunking mortgage eligibility myths: Misconceptions about mortgage eligibility can hinder homeownership, but with expert guidance, many may qualify. Property Hub Mortgages assists those buying or refinancing homes. Fill out the form at propertyhub.net/mortgages for help.
Buying your first property is a significant accomplishment, regardless of its size or complexity. Misconceptions about mortgage eligibility can prevent some individuals from pursuing homeownership, but with the right guidance, they may discover they qualify. Dave, our expert guest, shared valuable insights and debunked common myths during this episode. As a result, Property Hub Mortgages was launched to help those in the process of buying or refinancing their homes. Don't hesitate to visit propertyhub.net/mortgages and fill out the form for assistance from our team. Remember, taking action towards your property goals is the first step towards achieving them. Thank you for tuning in, and we'll see you next Tuesday on Ask Robin Rob.
