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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
Remortgaging: Should I fix for two years or five years?
Newbie landlord here! I am after some remortgaging advice please as I am about to come to the end of my initial buy-to-let two-year fixed rate.
Do most landlords tend to opt for a five-year or two-year deal when they reach this stage? I initially opted for a two-year deal to give me some flexibility to sell up if the Landlord Life wasn’t working out.
However, I am now planning to stick here for the long haul so I am seriously considering a five-year deal to protect my finances from any interest rate rises.
Any advice on the pros/cons of two versus five-year fixes would be gratefully received, along with any other useful remortgaging info! Thanks so much, in advance.
Answer
Firstly, welcome to the world of landlording. I’m glad the first few years have gone well.
Rates are incredibly low, and pricing will go up, likely at the end of this year. Rates will be higher in two years than they are now, plus you will be required to pay fees to negotiate a new deal.
A five-year fixed term rate may seem slightly expensive at this current time. However, I suspect that if you factor in a higher cost of borrowing from year three, adding your additional fees, the five-year fixed products seem best for you.
As always, the risk with a five-year fixed product is if rates fall; however, this is very unlikely. Also, you are tied to early repayment charges in the case where you would like to sell the property before your term expires.
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Question
Can I purchase a buy-to-let following redundancy?
I was made redundant in July and received a very large pay out, which I have decided to invest in a buy-to-let property.
I have done my sums and I would be able to put down a 25% or 30% deposit on a property with the cash I have.
For context, I am 53 and have decided to go into early retirement and perhaps get a part-time job in a couple of months’ time to keep me occupied. My husband will remain at work to support us financially at home.
My question to you is this – will the fact I am not earning a salary impact my chances of getting a buy-to-let mortgage? I read somewhere you must have minimum income of £25k per year.
My husband would rather not get involved in the mortgage/ownership of the new property for tax reasons so it would all be on me. Any advice would be superb.
Answer
Some lenders do require a minimum income of £25,000 before they consider an application.
However, others do not have this requirement, so I’m confident a lender can offer you a mortgage. I advise you to speak to a mortgage broker to steer you in the right direction.
It’s worth mentioning tenants-in-common. This is where you would buy the property jointly with your husband but own a defined percentage share of the equity each. Doing this would allow you to use his income to boost your application and borrowing potential.
However, from a tax perspective, if his ownership were, for example, 5%, then he would receive just 5% of the rent and pay tax accordingly. I advise you to discuss this with a tax adviser if it’s of interest.
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Question
Are new build properties eligible for buy-to-let?
I am about to purchase my second buy-to-let and have spotted a couple of new build homes which look like they might be suitable.
Are there any restrictions on lending on new builds and is there anything else I need to consider. My first BTL is a Victorian terrace in the North East of England and it was all very straightforward but I wondered if the yield might be more generous on a new build. Hope you can help!
Answer
New build properties are relatively straightforward; most lenders will treat them as non-new builds.
Flats are slightly different – some lenders are happy to lend, others may reduce their LTV or not lend at all!
If you have found a great new build property for your portfolio, don’t worry, you should be able to finance it.
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Question
Opening a limited company – how easy is it?
I have heard that switching to a limited company structure is better for landlords for all sorts of reasons. I am thinking about making the change but wondered if the process was difficult or long and if there were any additional costs I might need to consider.
Also, would I need to take out a specialist mortgage in order to run in a limited company structure?
Answer
Holding properties in a limited company is a popular way to structure your portfolio. The process of applying for the mortgage is similar to doing so when owning the property in your name.
You will require a mortgage appropriate for LTD Companies, which are easily available and not classed as specialist anymore. However, these tend to work out slightly more expensive than personal name buy-to-let mortgages in terms of interest rates and arrangement fees.
So, I advise you to get a quote from a broker for both circumstances, speak to a tax adviser, and ask them which structure would be more beneficial to you.
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