Landlords have much more choice in buy-to-let mortgages and loans, compared to a year ago. Despite mortgage relief being phased out and tighter regulations regarding landlords’ borrowing, there is now more choice than ever. Data from Moneyfacts shows there are 2,022 buy-to-let financial products on the market, which is 29.8% more than this time last year. Also, research from specialist buy-to-let brokers, Mortgages for Business, has shown that there is no arrangement fee for one in five buy-to-let mortgages. This time last year, it was only 11% of mortgages. However, it does mean that the majority of buy-to-let mortgages are still charging a minimum arrangement fee of 1%. That said, it is worth investigating whether fee-free deals are really the better option. Whilst landlords will save money in upfront costs if the mortgage arrangement fee is scrapped, the rates on fee-free mortgages could be higher than those which have a fee attached.
From September, mortgage lenders have had to apply stricter standards for landlords with a portfolio of four or more properties. Multiple changes by the government and the Prudential Regulation Authority have meant landlords and finance companies have had to rethink their options. However, according to moneyfacts.co.uk, this has not put off either providers or investors. Their finance expert, Charlotte Nelson, said there has been an increase of 464 financial deals in one year. She added that this means the buy-to-let market has broken yet another record and risen above the 2,000 mark for the first time in its company records.
At the same time, the number of interest-only mortgages is falling. Information from UK Finance shows there are 1.7 million interest-only mortgages outstanding, which is down 46% in the past six years. Many borrowers, including buy-to-let investors, are either paying off these mortgages by downsizing and buying smaller properties or using savings to pay off the debt.
One new type of deal on the market is a bridging and buy-to-let combination mortgage, which has been launched by UX Mortgages along with Tiuta, which provides bridging loans. This dual-action product is believed to be the first time that bridging and buy-to-let mortgages have been combined. Bridging loans are seen as a short-term financial option which can be implemented quickly. With this deal, the loan can be transferred to a mortgage for the longer term. The bridging aspect means an investor can have the required funding to buy a property within 24 hours. UX managing director, Randeesh Sandhu, said this dual offer means investors have the peace of mind that a guaranteed mortgage brings. It can also save them thousands of pounds in interest, when compared to traditional short-term bridging loans.
These new deals and the number of new products being offered to investors suggest that there is still a lot of optimism in the rental sector. Financial companies are looking at ways to remodel their loans to suit the needs of today’s buy-to-let landlords. Investors can also shop around – or use an independent adviser – to ensure they get the best deal.
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