This year continues to present an opportunity to expand (or begin) our property portfolio.  But, recent changes in the BMV marketplace need to be taken into consideration ... so, what are they?

1. Stamp Duty Land Tax (SDLT)

During 2009, you and I could enjoy buying property up to £175,000 without the additional expense of SDLT.  The Chancellor however, withdrew this 'concession' at the end of last year, which means any new purchase over £125,000 now carries tax on the whole purchase price i.e. £125-250,000 at 1%, £250-500,000 at 3% and, 4% over half-a-million. 

2. Below Value Market (BMV) Amounts

Last year it was common to obtain a property of 25% BMV or better. This year, many pundits report that the UK is over the worst of the recession, though they cover their professional rear-end by saying property prices will probably not grow by much this year. Public confidence too, appears to be returning in the UK, albeit slowly.  

We BMV'ers however, will have noticed a steady increase in cash investment required to purchase: last year it was typically £4-5,000; this year it appears to be £8-9,000.  This is due to to several events including: a) increased finders fees as the better propertes become more difficult to find and negotiate; b) on-going difficulties obtaining competitive funding from lenders; and, c) further regulation biting into the Sale & Rent Back market. 

3. Loan To Value (LTV) & Interest Rates

This week saw the Bank of England maintain its 0.5% Bank Base Rate (BBR). Pundits predict this rate will be with us until the end of this year. Though this umprecidented BBR has been with us for several months now, generally speaking, lenders have not passed on the benefits to you and I unless we accepted a LTV of 60% or less: not especially attractive for BMV's.  For LTV at or over 75%, interest rates were typically 5% +/-. Good old 90% LTV was now only a dream making remortgaging existing high LTV mortgages next to impossible.

Last week however, we did see one major lender take the market by the scruff, re-launching themselves at rather more competitive interest rates for 75% LTV.  We hope this pro-activity will draw more lenders into the competitive arena for the good of you, I and the overall housing market.

4. Subject To Status

Higher LTV together with lower interest rates have got to be good news for all of us but the catch is the borrower has to be squeakier and cleaner than ever. Lenders are already seeking more revealing data about borrowers including proof of deposit.

5. Rental Calculations

BMV purchasing is encompassed within Buy-To-Let (BTL) lender rules.  To obtain a mortgage nowadays, borrowers must prove an income of at least £25,000pa (can be a combined income) but, it is the rental return that determines maximum LTV borrowing. 

6. Finders Fees

Unless you want to spend weeks learning to be a property scout and hundreds of hours trying to locate good BMV properties yourself, it makes sense to use those who make it their profession.  In this way your focus is on the finished cake, not the baking.

 

Finders fees during last year were around £2,000. This year they are nearer £4,000.  We anticipate this will be an on-going trend for a while. 

If you don't want Stamp Duty Land Tax, stay under £125,000 valuation!

If you don't want to pay any deposit, stay 25% Below Market Value Investment or better!

If you want maximum Loan To Value on a £124,999 purchase, make sure the rent exceeds £390pcm (assuming a lending rate of 5%)!

If you want the transaction to go smoothly, keep 25% deposit in your deposit account!

If you want suitable property quickly, stick with a reputable source!

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