Especially for our London Buyers:
Due to our relationships with both buyers and investors in London we have devised a few points that come up frequently when liaising with our commuters re-locating or investors wanting to make a more informed choice about the local area.
Milton Keynes as a property investment Opportunity
The UK buy-to-let mortgage market is always present because of the need for rented properties.
Milton Keynes is especially attractive because of its geographic location 50 miles in between Birmingham and London, with great transport infrastructure. One of the reasons many company head offices are locating here creating more jobs and in turn more people requiring accommodation.
In recent times it has been said that MK is the fastest growing city in Europe and when you consider its size and increase in population ver the short 30-40 year history that statement would not be hard to believe.
Many mortgage lenders offer specifically designed buy-to-let mortgages at very competitive rates. If you are a first time buyer with no proven record of paying a mortgage, the lender will make more rigorous checks to ensure that you can afford to meet the repayments, and may impose age restrictions as well as specifying a minimum income.
Lenders may consider that they are taking more of a chance with a buy-to-let mortgage, so you may be expected to find a larger deposit than if you were taking out a residential mortgage. The minimum will be 20-25 per cent, depending on your circumstances and possibly the type of property you are looking at. So, in order to buy an investment property costing £80,000, you would need to put down a deposit of at least £12,000. In addition, the lender may also charge slightly higher interest rates and arrangement fees for a buy to let mortgage than they would charge with a residential.
Each mortgage lender will have a method in place to calculate the amount you can borrow. The rent you will be paid must usually be around 130 per cent of your monthly mortgage repayments. So, for example, if your monthly mortgage repayment is £1,000, your tenant should be paying you rent of a minimum of £1,300. The lender will also want to be assured that the property you are proposing to buy is a good long-term investment. You also need to think about whether you could afford repayments if there is a rise in interest rates. Most buy-to-let investors choose interest-only mortgages on two to three year fixed rate deals: however, it is essential to seek specialist mortgage advice from an independent buy to let mortgage advisor first. Right-Advice advisers specialise in the sector and are readily available to assist with your queries.
With an interest-only buy-to-let mortgage you make greater income tax savings, as mortgage interest attracts tax relief on buy-to-lets, but at the end of the term you may still have the entire mortgage loan outstanding. Although there is a great deal of buy-to-let mortgage information around in magazines and online, we recommend you seek buy-to-let mortgage advice from a mortgage broker With an interest only buy-to-let mortgage you make greater income tax savings but at the end of the term you may still have the mortgage loan outstanding. However, you should always seek proper financial advice to ensure that the method of repayment is appropriate for your circumstances.
A buy-to-let property should be viewed as a long-term investment and not something you undertake with a short-term view. Most experts believe you should be looking at a 10 – 15 year term to see a reasonable return on investment. With the right market conditions, you could see a return on your capital in the short term but there is always the possibility that house prices may fall. Don’t forget that you will also have to pay Capital Gains Tax when you sell a buy-to-let, as it will not be your principal private residence.
See our Buy to let Guide for more helpful information in the sector.