There has been a steady increase in Contractors investing in a Buy to Let property or indeed a portfolio of properties since their introduction in 1996. According to recent research a Buy to Let is actually the best investment in 18 years. The return on investment is quite astonishing with annual returns of over 16%, superseding other investments such as equities, bonds, cash and commercial property.
Interestingly, the research conducted on behalf of Paragon Mortgages gave a comparative of the value of £1000 in today’s money if it were invested in various assets at the inception of Buy to Let in 1996. For instance if that £1000 had been invested in cash it would be worth only £1,949, £2,924 in UK government bonds, £3,082 in UK equities. A slightly more lucrative return would be in commercial property at £3,654. However, with a Buy to Let property bought with a 75% LTV this would of grown by a whopping £13,048 by the end of 2013, a compound annual return of 16.3%.
It is clear that since 1996 Buy to Let has surpassed the interest payable on mortgages. Landlords who paid cash with each £1000 invested in property in 1996 found their return was worth £4,791, a compound annual return of 9.7%. This was based on these investors buying a single property and only purchasing another property once enough gain had been achieved on the first property.
The research assumed that Buy to Let investors started with one property but once this had provided a 25% deposit this would be put towards the next property, beginning a portfolio.
How can Contractors take advantage?
Contractors are able to take advantage of this great return on investment, the Advisers at ContractorFinancials work closely with Lenders who can offer very competitive mortgage rates.
Buy to Let mortgages are calculated using the rental yield of the property that you are purchasing. The rental yield will need to be 125% of the annual mortgage repayments, this indicates to Lenders that you have the ability to comfortably cover the mortgage repayments.
Contrary to popular belief, you will still need to prove your income to the Lender when you apply for a Buy to Let mortgage as the Lender will want to make sure that you can afford to cover the repayments if you find yourself without a tenant for a period of time. ContractorFinancials can base your mortgage affordability on your contract rate alone whereas if you were to approach a Lender direct they may demand to see two years of accounts. As long as you earn an average contract rate of approximately £100 per day, equating to £25,000 you will be able to qualify for a Buy to Let mortgage.
What are the costs involved in securing a Buy to Let mortgage?
Typically, Buy to Let mortgages are available at a maximum 75% loan to value which requires potential landlords to save a 25% deposit. However, the specialist mortgage team at Contractor Financials have managed to secure a Buy to Let mortgage with as little as 15% deposit.
Other ongoing costs to consider when venturing in to Buy to Let are the running costs of the property i.e. maintenance, do you have enough funds to cover this? Have you made sufficient provision for service charges and ground rent if it’s a leasehold? You will also need to allocate money for specialist buildings and contents insurance as a standard residential policy won’t cover you as a landlord.
Thankfully, the specialist Advisers at ContractorFinancials won’t charge 123 Contracting clients a fee for their expert advice or for the processing of your mortgage application. This can save you upwards of £500 compared with other brokers which can help fund any decorating or maintenance costs for the property to get it ready for tenants.
To secure the most competitive Buy to Let mortgage rates, contact ContractorFinancials on 0208 150 3844 or email 123Contracting@contractorfinancials.com and enjoy the benefits of the ‘best investment’ of the last 18 years.