Advertorial What can landlords do if they need finance?
There are around 2.7 million landlords in the UK who declare some kind of income from renting. Despite this surprising and huge figure, landlords can often come up short financially whether it is due to a lack of rent from tenants, lack of occupancy or facing the brunt of building fixes, housing disrepairs and renovations.
Landlords in the UK seeking financing options have a range of choices tailored to their needs within the dynamic real estate industry. Whether looking to expand their property portfolio, carry out renovations, or manage operational costs, various avenues are available to secure funding. Here's an overview of what landlords can do to access finance within the UK property industry:
Buy-to-Let Mortgages
One of the most common ways landlords finance property acquisitions is through buy-to-let mortgages. These mortgages are specifically designed for landlords and generally require a larger deposit than standard residential mortgages. Interest rates and terms can vary, so it's essential to compare offers and consider your rental income's sustainability in covering mortgage repayments.
Remortgaging
Landlords can refinance their existing properties by remortgaging. This involves switching to a new mortgage deal, often with better terms or lower interest rates. The released equity can then be used for property improvements or purchasing additional properties. It's crucial to calculate the costs involved, including early repayment charges, arrangement fees, and potential legal fees.
Limited Company Mortgages
Many landlords have established limited companies to manage their property portfolios due to tax advantages. Limited company mortgages are designed for these entities, providing financing for property purchases within the company's structure. These mortgages consider the company's income and financials, potentially offering tax benefits.
Bridging Loans
Bridging loans are short-term loans designed to bridge the gap between buying a new property and selling an existing one. They can also be used for property refurbishments or renovations. Interest rates tend to be higher, but bridging loans offer speed and flexibility. Landlords should have a clear repayment plan before considering this option.
Commercial Mortgages
For landlords looking to finance properties used for commercial purposes, such as retail or office spaces, commercial mortgages are available. These mortgages typically have different eligibility criteria and terms compared to residential mortgages.
Landlord Lines of Credit
Some financial institutions offer lines of credit specifically designed for landlords. This credit facility allows landlords to access funds as needed, which can be useful for managing property maintenance or unexpected expenses.
Development Finance
Similar to bridging, development finance provides funding for larger-scale projects within a short timeframe. For landlords interested in property development or major renovations, this option often involves working with specialized lenders who understand the unique challenges of property development. You can receive money in tranches and repaid in chunks, such as installment loans. This can help with your cash flow, usually covering the land costs and 50% of the build costs.
Government Schemes
The UK government has introduced various schemes to support landlords and property investments. For instance, the Help to Buy scheme assists individuals in purchasing new-build properties, while the Green Homes Grant offers funding for energy-efficient improvements.
Landlords should carefully assess their financial situation, investment goals, and the specific needs of their properties before choosing a financing option. It's essential to compare interest rates, fees, terms, and potential risks associated with each choice. Seeking professional advice from financial advisors or mortgage brokers can help landlords make informed decisions that align with their long-term objectives in the UK property industry.
