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Buy to Let Criteria
The days when buy to let investors were expected to pay 20% deposit and have minimum of 130% rental income have long gone.
Lenders are keen to lend to buy to let investors they now want only small deposits and lower rental income making it for easier for people to invest in property and to build up portfolios. The main change has been that instead of 125% rental cover 110% or even 100% have been introduced.
Other changes have been that it is not always necessary to prove income and the minimum income has declined. Rents have been rising but house prices have risen even faster giving lower rental yields. Lenders calculate their rental cover differently and a 110% from one lender may be more difficult to attain than another’s at 125%.
Some lenders now only have applications, valuation and money laundering requirements. The risk has lessened, competition has pushed down prices encouraging lenders to become more lax with their criteria. It could be seen that lenders who have been pricing for the market rather than risk could be seen to be irresponsible lenders.
Lenders say they are competitive but will not give away products just to gain custom. Margins are beginning to narrow and the higher base rate will have an impact. Following the US crises lenders are becoming more stringent to not professional buy to let investors and are already frowning on the new build market.
It is felt that first time buy to let investors are those most at risk it and many feel that low 100% cover should only be for landlords with portfolios. The main aim should be that both lender and client is totally happy with the risks being taken.
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