According to information from Mortgage for Business, more than 85% of Buy To Let (BTL) loans are currently open to the opportunity for remortgaging. Born from market instabilities due to the pandemic, this change could indicate considerable potential for those invested or looking to invest in BTL properties.
Compared to last year, measurements taken on BTL shifts place this change not solely on growing rates of BTL remortgaging acceptance, but rather on a reduction in the overall remortgage market. Those lenders which do remain are increasingly moving into remortgaging to stay competitive, offering significant financial benefits for users if properly utilized.
So why are commercial remortgaging and mortgaging different than residential variants, and when can they be worthwhile pursuits? We take a look at the most important aspects, that our readers might determine if now is the right time to enter the BTL marketplace.
Commercial Versus Residential Mortgages
Taking a close look at residential and commercial mortgages shows only a few major and easy to understand differences. The first is that, while a residential mortgage can last from one to 30 years, a commercial mortgage upper maximum is around the 15-year mark.
Also setting the two apart is that commercial mortgages can borrow a maximum of 70% loan-to-value (LTV), while a residential mortgage can reach as high as a 95% LTV. Other than this, key differences in regulation and repayments, which can themselves differ heavily between individual loans, will generate considerable variety between residential and commercial mortgage options.
A commercial mortgage is a loan that is secured against a business-related property that a person does not currently own. BTL mortgages are a subset of this which can operate slightly differently in that they come with higher possible LTVs compared to standard commercial mortgages. Compared to the upper bounds of 70% LTV for regular commercial mortgages, BTL LTVs can reach up to 85%.
This higher LTV can make commercial mortgaging a much more manageable pursuit for those looking for a form of profitable investment. With lower initial deposits and more reliable performance in rental properties, especially in areas with limited housing, BTL mortgages can be a comparatively simple form of commercial loans.
A remortgage is simply an exchange of a current mortgage for another which is better suited to a person’s current situation or needs. Common reasons for seeking out remortgage deals include when owners are trying to find better rates, paying off other debts, or looking to buy additional property, with sites such as Trussle providing you all the relevant information as well as allowing you to compare the different deals.
This can be a useful tool in times of economic uncertainty, or when presented with a rare opportunity, making remortgaging popular among savvy investors. While it is often possible to remortgage with existing lenders, there are also systems in place to help shift from one lender to another, should other terms prove more favorable.
Whether taking advantage of the current global situation or looking to invest or reinvest in the future, commercial mortgaging and remortgaging can be indispensable. As with any major financial venture, the most important factors are those of patience and understanding. If any of these avenues sound appealing, consider putting in the work, and not letting the prospects these represent pass you by.
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