If you’re looking to purchase a buy-to-let property, then buying off plan could be a great way to secure a new build at a competitive price. The procedure for mortgaging an off-plan property is slightly different, but there are still great rates to be had for investors – especially if you have multiple properties.
What is Buying Off Plan?
Buying off plan is the process by which you purchase a new build before its construction has been completed. In some cases you might only see a plan of the property before buying it, or perhaps you might visit a show home to get a sense of what the finished article will look like.
Buying Property off Plan: Good Deals to be had?
There are various advantages to buying in this way. Firstly, you can often have some say in the design of the property – selecting fixtures and fittings, for instance. In some cases you may even be able to influence the layout of the property. Secondly, you can get very good deals buying properties early like this. Once you have signed the contract, the property could appreciate before the build is even completed – meaning you start off with a profit, before you even pick up the keys.
Buying Property Off Plan: What are the Risks?
However, there are certain risks to buying off plan which you should be aware of, in order to make an informed decision. Firstly, there is always the chance that your property will depreciate between singing the contract and the completion of the build. This means you could potentially start with a loss, before tenants even move in. There is also the risk that there could be problems with the developer – including them going bust – before you are able to move in. In this scenario you could feasibly compromise your deposit. The contract you sign is binding, which means that a shock redundancy or a mortgage falling through won’t matter to the developer – you will still be legally obliged to go through with the sale. These are all important possibilities to consider.
As most people are aware, the process for mortgaging a buy-to-let property is different to a residential mortgage. Firstly, a larger deposit tends to be required. You also need to have a realistic idea of the rental income your property will command, as lenders will need to know this. It’s also important to think about the type of tenants you plan to work with – longer term tenants will be more attractive to lenders than short term or holiday lets, or DSS tenants and students. Also remember that you will be responsible for covering the mortgage if the property is vacant, so ensure that you have factored this possible expense into your plans.
Get the Best Deal!
It’s vital to get the best deal on your mortgage, and it is recommended you get advice – especially if you have multiple properties. If you are in this position, then there are some great deals available from lenders for large buy to let mortgages.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
Paul Welch is the CEO & Founder of Largemortgageloans.com, a London-based mortgage broker which specialises in mortgages over £500,000.