Buy to Let Mortgages just got easier!

As Independent Mortgage Advisers, ContractorMoney have helped hundreds of Contractors invest in the residential rental market. 'Buy to let' has proved very profitable in recent years, is a useful hedge against fluctuating contract rates and is increasingly looked on as a future pension or as an early exit strategy from the rigours of freelancing.

Excess rental cover disappears
One of the great limiting factors that the mortgage advisers face when talking to clients eager to build up their property portfolios, has been the requirement that the anticipated rental income covers a multiple of the monthly mortgage payments on the prospective purchase. Invariably lenders insist on a conservative safety margin and insist that rents exceed mortgage payments by between 125 and 130%.

ContractorMoney now have access to buy to let mortgages with no requirement for proof of rental income which should be of great help to any investor who is struggling with the traditional rental multiples.

Development opportunities
The advisers are regularly talking to Contractors who are buying properties with development potential. In many cases the current poor state of the property dictates that valuers will not verify a sufficient anticipated rental income to support the required mortgage.

This new product will change all that, opening up the prospect that substantial capital gains can be made from initial renovation works. These improvements will, in turn, improve the rental income that a property can generate as the property appeals to a wealthier clientele.

And lower deposits
Whilst most lenders still restrict buy to let mortgages to a maximum 85% of the value of the property, Contractors now have access to schemes that allow you to borrow up to 90%.

Having to only find a 10% deposit allows Contractors to further 'gear' their investments which should allow portfolios to be built quicker than would otherwise be possible. This is one reason why many investors favour buy to let over alternatives such as pensions because you are using the banks money to ramp up any exposure to the growth in property prices.

Gordon Brown misses out!
Conditioned to pay off debt, Contractors will sometimes miss out on legitimate tax planning opportunities re buy to lets. Any interest payable on a buy to let mortgage can be written off for income tax purposes against rents received. As result a larger loan size is, paradoxically, desirable on a buy to let whereas no such tax break exists on residential borrowing.

The futures still bright for buy to let
With property values still clocking up over 9% annualised growth, there appear to be substantial gains yet to be made. With ever increasing demand for the smaller, often single occupancy dwellings which make up a substantial part of the buy to let sector, demand still looks strong. Add to this immigration and the lack of new build and buy to let appears to be a good long term bet.

As with any investment the trick is likely to be to take a long term view and if the sector is likely to be an increasingly important avenue for Contractors looking to save for the future these new buy to let mortgage products seem to be a very timely addition to a freelancer's investment armory.

Return to Articles page