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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 0345 345 6788
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Question
Renovating a wreck – how do I finance the project?
I am have spent the last 10 years raising my children and have come into so money so I have decided, now my children are all at school, to start a project.
I plan to buy a property at a knock-down price to renovate and then let. I understand I cannot get a straight buy-to-let but must get a bridging loan.
Can you please talk me through this process? I am particularly keen to understand the maximum time for which I can get a bridging loan and then how I transfer this into a buy-to-let.
For your information I am looking at properties in the £100k region and have £50k inheritance to put down so I would eventually need a mortgage of 50% loan-to-value.
Answer
Bridging loans are available for a term of up to two years. However, they are quite expensive so you would want to be able to get out of the bridging loan as quickly as possible.
In terms of the process, as soon as the property is in a lettable condition you would be able to replace the bridging loan with a mortgage – this process is called remortgaging.
There are some buy-to-let products which are a two-stage mortgage (this includes a bridging loan and then buy-to-let mortgage from the same lender), or you can take a bridging loan with one provider and then remortgage to a different company.
Essentially which option is most appropriate will hinge on pricing at the time – an experienced buy-to-let mortgage broker would be a good place to get some advice on this.
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Question
Help needed with rental yield calculations
I am considering dipping my toe into the buy-to-let market having been tempted in investing in bricks and mortar for some time. I wondered what a mortgage lender might consider a good yield. How would I go about calculating this for each property I view?
Answer
So the yield is the gross annual rental figure, divided by the property value. In terms of what ‘good’ looks like, it depends on the location and property type.
For example, a yield of 5% on a family home in London would be seen as good, but for a multi-let in Manchester, this would be viewed as poor. There is lots of information available online on typical yields in specific locations so this could be a good place to start your research.
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Question
House has fallen in value: Can I remortgage?
I bought a buy-to-let two years ago and am due to remortgage. Unfortunately, property prices have taken a tumble in the area and I am worried I might not get such a good deal on my remortgage. Is there anything I can do to improve my prospects?
Answer
Firstly, mortgage rates are incredibly competitive at the moment, so you may find it’s not as bad as you fear!
Aside from reducing the balance on your mortgage to help rebalance the loan to value, my best advice would be to speak to a mortgage broker who will be able to look at the whole mortgage market and advise on options.
It’s also worth speaking to your current lender to see what they will offer to you, as a comparison.
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Question
What’s the maximum age for a buy-to-let mortgage?
I am 50 next year and looking at boosting my retirement income by getting myself a buy-to-let investment. However, I realise my age is not necessarily going to work in my favour.
I have quite a large chunk of equity to put into the project – probably around 40% – so I would not need a huge mortgage. Yet, I also realise I am going to be paying this off on in interest-only basis. Will I fulfil the lenders’ criteria?
Answer
So at 50 years old, you are a spring chicken! Most buy to lets are available to age 75, and many go beyond this. So your age will not be a problem for you at all. Good luck!
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