As a landlord, maximising your rental profits means keeping your costs under control – and that’s especially important in the current economic climate, when we’ve got a cost-of-living crisis.
One of your biggest monthly outgoings is likely to be your Buy to Let mortgage payments and there have been some pretty frightening headlines recently about the availability and affordability of mortgages. But, although many fixed rate mortgages were temporarily pulled after the mini budget last September and rates have gone up recently, the positive news is (a) there are now plenty of products in the market again, and (b) it’s possible to access two and five-year fixed deals at below 4%, and some variable rates are even lower.
So, here are five steps we’d recommend you take to make sure you don’t pay more than you need to for your mortgage:
- Know what deal you’re on and when it expires
The first thing to do is check your current deal and when it expires. If you’re on a fixed deal, the product will default to a higher interest rate once the fixed term comes to an end, so you should ideally be planning up to a year ahead of that to make sure you get a new deal in place and don’t suddenly end up with a payment hike.
- Check your property’s current value
Although average house price growth is now slowing for some, capital values increased well on the whole during the pandemic and they’re still going up in many areas. So, if you haven’t had your rental property valued in the last 6 months, consider doing that now.
You can get a reasonable idea of the current value of your property by looking at similar ones on the market in the area. And you can check recent sold prices by searching the land registry by postcode and house type. But for a more accurate, up-to-date valuation, just get in touch with your local Your Move branch and we’ll be happy to carry out a tailored market appraisal.
- Work out your current LTV
One you know how much your property is worth, check how much mortgage loan you have outstanding and work out the current loan to value (LTV). If you’ve gained enough equity to make a significant difference to your LTV from when you first took out the mortgage, it could open up some options for you.
Generally speaking, the lower the LTV, the better rates you can access so, even with interest rates potentially rising, you might be able to remortgage onto a product where your monthly payments are similar to what they are now. Or you may be able to release some of the equity to use elsewhere – this is something that should be talked through with your financial adviser.
- Have a long-term finance plan for your Buy to Let
If you don’t already have a maintenance schedule and expenditure plan for your Buy to Let, it’s worth putting one together. You need to know what your future outgoings will be so you can budget ahead and make sure there’s capital in reserve for when bigger jobs need doing.
As well as your regular costs – e.g. the monthly mortgage payment, annual gas safety check, insurance costs and an allowance for minor repairs – you need to factor in the larger periodical jobs. Those are likely to include:
- Redecorating every 2-3 years
- Replacing furnishings and appliances every 5-10 years
- Refitting bathrooms and kitchens every 10-15 years
- Replacing the boiler every 10 years
- Periodical repairs to the fabric of the building
Note that the minimum EPC rating to legally let a property is likely to rise to ‘C’ sometime between 2025 and 2030. So, if your property is currently rated below that, you need to find out what kind of work you’ll have to do to improve its energy efficiency and put that in the budget.
Once you have a good idea of your future expenditure for the property, you can budget properly and look at whether it might be worth remortgaging (if that’s possible) to release enough equity to cover the cost.
- Speak to a Buy to Let mortgage broker
As soon as you have up-to-date figures for your property’s value and running costs, you can have an informed discussion with a mortgage broker.
Although you can arrange a Buy to Let mortgage directly with a lender, the reality is that a huge number of these products are ‘intermediary exclusives’, which means you can only access them via a broker. So, even if you have a good relationship with your current lender, it’s always worth talking though your circumstances with a Buy to Let mortgage specialist who’s going to be able to access a wide range of different Buy to Let products.
They can discuss the best options available for you and will be able to help you decide what action to take, e.g. whether it might be appropriate to remortgage sooner, rather than waiting for your current deal to expire. They can also look at financing options to help cover your costs into the future, such as releasing equity, and give you a clear picture of how the next few years could work for you mortgage-wise.
You should then make a note to review your mortgage with a broker every 6 months, as lenders tend to release new products every quarter and it may be worth switching at some point. If you’d like to talk through your mortgage options with a specialist broker, you can get in touch with our partners, Embrace Financial Services at any time via our website.
Book a Buy to Let mortgage appointment
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Your initial mortgage appointment is without obligation. Embrace Financial Services normally charge a fee for their services; however, it is payable only on the submission of your mortgage application. The fee will depend on your circumstances but the standard fee is £549. Complex cases usually attract a higher fee. Embrace Financial Services will discuss and agree the fee with you prior to submitting any mortgage application.
Please be aware that the information provided within these archives has been pre-published, as of the date published on each article. The information contained within, including references to taxation, legislation, regulation, or any other issues or concerns may no longer apply.
The Your Move Content Marketing Team
