Buy To Let Mortgages: As banks lending criteria became more and more lax, this pulled in more amateur property speculators. Companies started up showing amateurs how they could build up multi million pound property portfolios in a short space of time.
Now to finance all of these purchases, the buy to let mortgage was introduced and over the last 10 years more and more lenders where offering a BTL mortgage with as little as a 10% deposit. Banks would lend money for buy to let for people who already had a bad credit score, whether they had missed payments on previous mortgages, CCJ's other loans. Or defaults on credit cards.
However since the credit crunch many lenders have pulled out of the market and those that have stayed in and can access finance have tightened up on criteria. With about five main lenders left in people looking to get into buy to let now have to find at least a 25% deposit to access funds. On top of this lenders have pushed arrangements fees up from just a couple of hundreds pounds to fess in the thousands.
With such tight lending regulation many people are finding it hard to get into the market, but what about all the investors that are already in with mortgages in the millions. These people are finding it harder and harder to remortgage the loans as banks are requesting sizeable deposits and the property must be cash flow positive.
What do we mean by cash flow positive, well pre credit crunch days lenders would lend on a property that made no money on a monthly bases as property prices were rising fast and the investor was gambling that prices would continue to rise. Now that the market has turned all these mortgage need to be refinanced as there introducer rates have come to an end.
Mortgages brokers are finding it increasingly harder to remortgage these buy to let deals, as the properties have lost value and the security is not there for the lender. Some properties never made money on a monthly basis and now with lenders requesting a minimum of 125% of the mortgage payment taken in rent for them to except, many investors are struggling to remortgage there buy to lets.
The only saviour in all of this for the investor is that the Bank of England has cut interest rates down to a record low of only 1%. This has been fantastic news as inventors as they have seen their monthly payment radically drop and save them from being reposed. However some buy to let mortgages have been tied to the LIBOR rate which has not fallen so much. It is these investors with LIBOR mortgages that can now no longer remortgage.