Until that time, the buy to let mortgage market had been somewhat subdued as it was by far the riskiest way to invest in the property market. Buy to let mortgages were also subject to incredibly daunting interest rates due to the degree of risk that it posed for both the investor and lender. It was almost a perfect world for the buy to let investor, but the way in which the market played up these risky factors brought on the meltdown.
The new, stable model of investing in property
Prior to the year 2000, the buy to let mortgage market was anything but simply a vehicle for individuals looking to rent out a property to those who couldn’t afford to buy. It was first and foremost a market ruled by those who already had buy to let properties, those who witnessed their property rise in value quickly and then decided to buy 2 properties so as to begin building a nest egg for retirement.
The only purpose of the property market, however, was to provide them with a place in the sun. It was a place where people could move or where the good life could be enjoyed. Investors but it was a relatively poor substitute for a solid long term investment, especially for those who had no intention of putting down roots in the country. The buy to let mortgage market became dominated by those who had no intention of only living in one particular town and one particular area of the country. The competition between the various operators in the market was intense, and at its peak almost every single borrower had an independent mortgage which came with a guarantor who also had intentions of living in the property purchased.
The Golden Three vs The Golden Two
The current model conflict however, is one where the GoldenThree vs the GoldenTwo scenario has been reduced to a very likable situation. In general the banks and other lenders are happy to lend you the money to buy your property. They would rather see their investment back in a position where you can re-mortgage and repay them, than putting a 25 year repayment period on your newly purchased property, with no guarantee of re-mortgage. Nor do they really care how many properties you have on your books at any one time because all it takes is one property to stop lending you money.
So, if you are considering purchasing an investment property in the current market you can, if you adhere to the correct advice, still purchase it with a buy to let mortgage, allowing you to invest in property until your personal circumstances allow you to once again convert your investment to cash and retire. It is all well and good jumping in to buy a property, knowing that in a year or two, you will benefit from the, what is potentially, a sound investment, but if you also know that you will not be able to sell it because you can’t re-mortgage and benefit from the profits, then the decision is much less clear. With such a lack of clarity in the market, many who jump in throw caution to the wind and don’t really know where they will land until many years later.
Buy to let mortgages in today’s market place are much less burdensome than they used to be, but it still pays to benefit from the expertise of an independent adviser.