Independent Financial Life Planners Bishop's Stortford: If you are thinking of Buy-to-let do the maths

Wednesday, 23 July 2014

If you are thinking of Buy-to-let do the maths

Enable’s Independent Financial Advisors in Bishop’s Stortford know that many, as part of their pension plan consider buy-to –let as a good investment but make sure you have done your maths before you jump in.

The first thing to do is to have a really good think about the cost of houses you are looking at and the rent you are likely to get. Traditionally buy-to-let lenders wanted rent to cover 125% of the mortgage repayments, although many had relaxed this in the tail-end of the boom years. Most also looked for a 15% deposit, which protects against falling prices. After the financial crisis, many are now demanding 25% deposits, or even larger, for rates considerably above residential mortgage deals. The best rate buy-to-let mortgages usually come with large arrangement fees.

Existing investors should now be benefiting from lower rates, and the slashing of base rate down to 0.5% has done them a favour. This is especially true for many as a lot of buy-to-let deals do not have typical SVRs but a revert rate that tracks the bank rate. However, new buy-to-let mortgage deals remain expensive in comparison to residential deals.

To compare different property's values use their yield: that is annual rent received as a percentage of the purchase price her is the maths. For a property delivering £10,000 worth of rent that costs £200,000 has a 5% yield. But you have to remember, if you are buying with a mortgage, rent-to-property price yield will not be the return you get. If you want to look at property as part of your wealth management portfolio Enable’s IFAs are happy to talk you through your options.

Your home is at risk if you do not keep up your mortgage repayments.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

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IFA Bishop's Stortford

At Enable Independent we know that our clients trust us and rely on our advice to help them to plan a better, more secure financial future. This is a responsibility that we take very seriously especially because we know that many clients have chosen us on the recommendation of friends and family. Each one of our advisers has deep expertise in their area of specialist knowledge and, as a team, we hold some of the highest qualifications available in the financial advice industry.

Our job satisfaction comes from using our skills to find workable, affordable and flexible solutions to meet our clients needs. Whether we are planning for known future funding requirements such as house purchase, school fees or income in retirement - or for the unforeseen such as job loss, long-term illness or early death, our independence from any product provider enables us to view the marketplace impartially. Our training permits us to look beyond a product's marketing hype and select on the basis of its fitness for purpose.