Remortgages now comprise almost half of all mortgage business written in the UK. This is largely due to the mainstream residential mortgage market. Refinancing buy-to-let mortgages is not quite as popular. The majority of buy-to-let mortgages approved are made up of mortgages obtained on the properties at purchase. Buy-to-let remortgages consist of a much smaller portion when compared to the residential market.
The reasons for this are unclear but could be attributed to property investors simply having less of a reason to remortgage that their owner-occupier counterparts. Investing in property is a long-term commitment and many investors choose buy-to-let mortgages that should prove sufficient, at least in the medium-term.
Additionally there has not been as much choice with regards to products to remortgage to. Initially there were only four lenders who provided buy-to-let mortgages in the UK. This number has grown to about 50 but it still not as high as the residential mortgage market. The lack of choice may be a factor in discouraging property investors from remortgaging as frequently as owner-occupiers.
The trend is changing, however, and buy-to-let investors are open to remortgaging more than ever before. The market is more competitive and lower yields mean that investors must be on the lookout for ways of saving on the running costs of their properties. Investors also like to release equity that has built up in their properties in order to provide the funds to buy more property or to fund their personal lifestyles.
While the primary reason for remortgaging a buy-to-let property may be to save money, switching lenders simply because of a lower interest rate is not recommended. There are many other factors to consider including exit and entry fees, the structure of the interest payments, and the flexibility of buy-to-let mortgages. Assessing a remortgage on the headline interest rate alone is not a good idea.
Instead, property investors must first assess whether their existing mortgage contains any Early Repayment Charges and whether the remortgage product has any hefty application fees and mortgage broker fees. Sometimes producing savings via a lower interest rate can be negated by such fees.
It is also important to assess the structure of the interest rates on buy-to-let mortgages. Ordinarily the rate will be attached to the Bank of England Base Rate (BoEBR) and will be offered as a tracker, discount, or capped rate. Interest rates can also be fixed for a period of time in order to help with budgeting.
Overpayments and underpayments may also be necessary throughout the term of the loan. Buy-to-let investors may find that they require such flexibility and if so they should seek to remortgage to a product that offers such options.
Finally, before switching to a new lender, investors should contact their current lender with the details of the product they are considering remortgaging to in order to find out if the current lender will match the offer. This could save the property investor both time and money. Lenders are often receptive to such propositions in order to retain the business of a good client.
The constantly evolving buy-to-let mortgage market has been contributing to the increase in demand for investment properties ever since buy-to-let investing became a mainstream form of investing. Ever since buy-to-let mortgages were first introduced to the UK in the mid-1990s, demand for private rental properties has increased considerably.
Many people consider investing in property as a means of funding their retirement. By investing in property people may not have to rely on underperforming pensions and equity based investments to provide for their later years. There is substantial proof that investing in property is more than just a hobby, with more than half of all landlords owning more than one buy-to-let property.
The growth of the investment property market owes a lot to the evolution of the buy-to-let mortgage market. In 1996 there were only a few lenders offing buy-to-let mortgage products that would allow would-be landlords to invest in the local property market. Since then dozens of specialist lenders have released buy-to-let mortgage products ensuring that modern-day investors have plenty of choice. This has helped many investors to grow their portfolios from small-scale operations to large, multi-million pound empires.
Without the availability of accessible buy-to-let mortgage products it would be virtually impossible for many landlords to achieve such levels of success. The majority of all residential investment property in the UK is financed primarily with a mortgage and a cash deposit. The mortgage normally provides the majority of the total funds required to purchase the investment property. Without the availability of such finance, the buy-to-let industry would not have boomed.
In more recent years overseas finance companies have also entered the UK buy-to-let mortgage market which has lead to an unprecedented level of choice. This has helped to reduce costs such as application fees and interest rates ensuring that more people than ever can invest in property. Local lenders now have to compete with overseas lenders and the increased competition has resulted in more competitive products for consumers.
Buy-to-let mortgages are also available to UK residents for buying overseas property. Parts of Europe ? such as Spain, Italy, and France ? as well as Florida, Australia, and the Caribbean have become popular with UK based buy-to-let investors in recent years. This trend becomes stronger when the local UK market experiences a downturn. During such times avid property investors who are hungry for new properties to add to their portfolios simply look to foreign markets to satisfy their needs.
Buy-to-let mortgage products have also become more sophisticated with some products starting to offer equity release facilities. Investors can release equity to either fund their retirement or to buy more property. The growing sophistication and accessibility of buy-to-let mortgage products for both UK and overseas property has helped demand for property investment grow steadily over the years and should continue to do so in the future. Despite some periods of turmoil property is regarded as a secure and long term investment that should stand the test of time provided the right properties are purchased with the best buy-to-let mortgages that are available.
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