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Buy to let finance has exploded in recent years, with a large number of high street lenders waking up to the fact that the private rental industry is booming. Consequently the number of buy to let mortgage products has increased considerably in the last five years.
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However, although there are several hundred different mortgage products available for landlords looking to invest or expand their portfolios, 10% of landlords quizzed by a property website had said they had problems obtaining suitable mortgage finance in the last year.
Lender Affordability Checks
Lenders are starting to introduce affordability checks, so landlords looking to re-mortgage or obtain new finance are being asked all kinds of questions about their household expenditure. Landlords now have to prove they are not solely reliant on their rental income and many lenders insist applicants have at least £25k from another source. Lenders are also insisting on larger deposits, usually at least 25%.
Not a Bed of Roses
Unfortunately the indications are that securing buy to let finance is going to get even tougher in the coming months, and with many tenants struggling to pay the rent in the face of ever rising rents, the private rental sector is not quite as rosy as many first-time landlords are led to believe.
Rising rents means a better yield, but on the flip side it also means landlords are at greater risk of falling victim to rent arrears. One way to avoid this from happening to you is to vet your prospective tenants: run credit checks and cross-check references. If you don’t do this, you only have yourself to blame if you end up and an unreliable tenant.
