Even those who bought as recently as five years ago have seen house prices increase 24.2% in Nuneaton (31% 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 using 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 2012 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 £350,000.
This means if they were to re-mortgage their home at its current value, on the same 80% loan-to-value as they had done five years ago, they would receive a surplus of £114,000 above their current mortgage balance. A five-year fixed rate mortgage at this level would come with an interest rate of just 2.1%
In this case, £95,000 of the surplus funds was used as the deposit for a £270,000 buy-to-let property whilst the £175,000 balance was leant by a bank at a cost of £379 per month (2.6% 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 also had £19,000 left to cover the mortgage arrangement fees, stamp duty and legal fees, meaning they paid absolutely nothing to purchase their £270,000 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 from the rent, they are now set to make £2,700 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. I believe there is now an exciting 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 on 02477 674545 or pop in and see us on Bond Street.