Remortgages for Investments Should be Carefully Considered
Remortgages are being used to fund retirements for many people who have seen their payoffs through investments and savings are failing to hold up to the needed levels of return. Remortgages are being used to get homeowners into the buy to let market by funding the purchase of a rental property. The buy to let market is booming and producing high level rental fees that can look very attractive to homeowners reaching retirement.
In a response to the Telegraph, Ray Boulger, senior technical manager at John Charcol, remarked on investing in the buy to let market saying "If you have found a property where the rent will cover the mortgage repayments you have two big questions. First, will rents go up if and when interest rates rise so they still cover your mortgage? And second, will property prices increase over the long term?
"If you are worried about an increase in interest rates, then you can get five-year fixed-rate buy-to-let deals at just under 5pc, compared to just under 4pc for shorter deals.
"Gearing your investment in this way means if the property only increases in value by 2pc a year that works out at an 8pc annual increase on your investment. While your short-term view of the property market may not be positive, it is hard to believe that house prices are not going to rise over a 20 or 30 year period."
There is some caution that should be exercised by homeowners looking for a buy to let investment opportunity as there is more to offering a rental property than finding a property and putting out a sign to attract renters. Remortgages for investments should be carefully considered but in the right situation it can be a smart consideration.