With house prices at all-time highs, many homeowners are likely to find
they have a good amount of equity in their home (particularly having repaid
some of the mortgage over the years).
Even those who bought as recently as 2010 have seen house prices
increase 18.2% in Chichester (15.9% nationally). This, coupled with
historically low interest rates, could mean there are ways to increase your
exposure to the property market by purchasing a buy-to-let property, without
spending any of your own money.
Let me explain with an example of a landlord I helped recently (who also
took advice from a mortgage broker, IFA and accountant) before going ahead with
the plan to invest for their long-term security; without costing them a penny!
They had purchased a house in 2010 for £250,000, with a £50,000 deposit
and a £200,000 mortgage. Just five years later, their mortgage balance was
£166,000, whilst their home was now valued at £300,000.
This means if they were to re-mortgage their home at its current value,
on the same 80% loan-to-value as they had five years ago, they would receive a
surplus of £74,000 above their current mortgage balance. A five-year fixed rate
mortgage at this level would come with an interest rate of just 2.6% (I wrote a
previous article highlighting that residential mortgages are cheaper than
buy-to-let mortgages so can be an efficient way to finance property
investments).
In this case, £70,000 was used as the deposit for a £200,000 buy-to-let
property whilst the £130,000 balance was leant by a bank at a cost of £356 per
month (3.29% interest-only, fixed for five-years).
With both mortgages fixed for five years they knew exactly what needed
to be paid, knew they could afford the repayments on the residential mortgage
and that the rent would cover the interest on the buy-to-let mortgage (and give
them some money left over each month). They even had £4,000 left to cover the
stamp duty and legal fees, meaning they paid absolutely nothing to purchase a
£200,000 buy-to-let property.
They’ve obviously taken on debt to do this, but with the payments fixed
(at record low rates) and a surplus being generated each month, they are set to
make £2,000 for every percent the property increases in value, at no cost to
them.
This is the same principal that I and many other long-term landlords
have used; refinancing their rental properties to buy more. There is now an
opportunity for a far wider audience to prosper due to the current climate of
low interest rates and recent property price rises.
If you’d like to have a chat about how this could work for you feel free
to get in touch.
(This article was featured in the Chichester Observer's property section
on 5th November 2015).
Clive Janes, CRJ Lettings.
www.crjlettings.co.uk
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If you are looking for an agent that is well-established, professional and communicative in Chichester, then contact us to find out how we can get the best out of your investment property.
E-mail me on clive@crjlettings.co.uk or call 01243 624 599.
Don't forget to visit the links below to view my previous buy-to-let deals and Chichester Property News articles:
Chichester Property Market LinkedIn Page for Clive Janes
CRJ Letting Agents Chichester Facebook Page
CRJ Letting Agents Chichester Twitter Page
Chichester Investment Property Management Specialist CRJ Letting Agents Website
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