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In this very difficult market we are not seeing too many Investment Portfolio’s that clients are looking to re-structure, to take advantage of a buyer’s market, because most of the lenders who are still willing to look at portfolio finance, have introduced some very difficult stress tests that have made it almost impossible to raise the required level of funding.In a normal market we would be looking at 70% LTV as a guide with coverage of the repayments at around 150%.
The value of investments can fall as well as rise. You may get back less then you invest.
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More About Investment Portfolios
With many changes in the buy to let portfolio market, investors now have to make a decision whether to buy properties in their own name or via a limited company to take advantage of the changes imposed by HMRC. The property market is still very buoyant but investors should be aware of the stress-test now being used buy lenders on most products. The effects of the changes would be that the mortgage repayment must be covered by 145% of the rental income assuming an interest rate of 5.5%. Currently some lenders are taking a more relaxed view when the client opts for a 5 year fixed rate product.
More about Investment Portfolios
Prior to the downturn in the property markets in 2007, many Investors preferred to keep their portfolio’s with one lender and to use the capital appreciation each year to enable them to gear up within the loan to value, without having to find any extra cash to put into the new purchase.
Unfortunately the downturn in the markets changed the dynamic’s of the plan, which saw most clients breaking up the portfolio, and remortgaging away to other lenders as they were in breach of the loan to value.
We are now just starting to see the return of Portfolio borrowing, with the property price boom in London, and the attractive investments within the magic circle of the M25 and certain Hotspots.
The main difference today from 2007 is that the niche lenders are not looking for exposure in excess of 20 properties, and most of the other lenders are comfortable with 5 or 10 properties. Lessons have been learned from the heady days prior to 2007, after which many lenders are still holding BTL portfolio’s and are waiting for the markets to return in order that they can dispose of them without causing panic in the market place.
Â Is it still a wise move to consider borrowing within the portfolio, yes but keep the portfolio small, 5 properties, which makes your life so much easier to take advantage of changes in the market, and to sell or buy at the right time. Also if lenders have a change of lending policy, you are only looking at changing part of your portfolio, rather than all of it. Reacting to changes in the property market is essential to enable you to grow with a spread of risk.If you would like more information, please call Michael J Alexander on 03452 605506 or 07867 794837 email email@example.com