British Buy To Let Avoids EU Regulation
The nationwide buy to let mortgage industry has managed to avoid the regulatory hand of the European Union, to the surprise of many.
The latest European mortgage directive, the Credit Agreements Related to Residential Property Directive (CARRP), has been passed by the European Parliament and is now the framework for mortgage market management continent wide. However, UK nationwide buy to let mortgages remain untouched thanks to intensive lobbying by landlord organisations and politicians alike.
The aim of the directive is to create a single ‘borderless’ mortgage market across Europe which will allow banks of any nationality to lend to individuals in any other EU countries. Alongside this the mortgage process would be standardised allowing consumers across the content to deal with common documents, mortgage features and rules. One of the results of the new legislation is the fact that lenders have to prove that borrowers can afford the loan they are attempting to take out.
Part of the reason the move was so hotly protested was fears that it would stymie the burgeoning buy to let lending market in the UK. With a 12% increase in landlords borrowing in July compared to June, and total lending being valued at £2 billion for the aforementioned month, there is no denying the fact that the buy to let lending is growing. How much do you know about this lucrative market though? Read on to have buy to let mortgages explained.
BUY TO LET MORTGAGES EXPLAINED
Buy to let mortgages are designed for individuals who are planning on investing in property to rent out to tenants. Although they are often more expensive than normal mortgages they can be worth the investment if they give you the support needed to become a property investor. Buy to let mortgages should only really be considered if you are prepared to take, and can cover, the risk involved in the property market.
They should be looked at as a medium to long-term investment, with the possibility that you will not see a return on your investment for a long time or possibly not at all. You must also remember that should your tenants leave, and therefore stop your income, you will still need to keep up with the mortgage repayments. However, enough about the doom and gloom of buy to let. How can it be successful? There are two ways. You can run a rental yield that eventually makes you more money than you initially invested or you can see capital growth, which is defined as the profit you earn when you sell the property for more than you paid for it.
IS A BUY TO LET MORTGAGE RIGHT FOR YOU?
With buy to let mortgages explained you’re probably wondering if they are right for you. A buy to let mortgage can be advantageous if you are committed to becoming a property investor and are in a position to cover the risk involved. Don’t forget that the rent you can charge can vary dependent on a myriad of factors, some of which are not under you control. There is also the possibility that you will go through periods where your house has no tenants whatsoever, you have to be able to cover your mortgage costs off your own back at these times or risk losing the house. Despite the current trend there is always the possibility that house prices could fall, if this was to happen you may not be able to sell your house for as much as you brought it for and you would have to cover the extra mortgage cost yourself.
Also, remember that being a landlord can incur sudden, unexpected costs. Anything from surprise repairs to difficult tenants can sap your money, make sure you budget sensibly when considering taking out a buy to let mortgage. However, with all that said and done, if you do it right becoming a landlord can be a very lucrative decision. With constant tenancy you have steady income and, if the property market is kind to you, when you come to sell you could walk away with a profit.
Written by Lajla Turner | Lettings Manager
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EU House Image Attribution: Európa Pont
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