The accidental landlord: buy-to-let flats are tempting while interest rates are low

The accidental landlord is tempted by buy-to-lets while interest rates are low - but could this be a loan to far?
£415 a week: for a two-bedroom flat at Craven Mews in Taybridge Road, SW11

For a year now I have been dithering about whether to buy another rental property, encouraged by the Bank of England's indication that there are to be no sudden leaps in interest rates, suggesting it's a good time to invest.

But with nothing more than loose change in my bank account I'm wondering how best to raise a deposit.

I'm assured by mortgage broker Martin Stewart of London Money that I won't have any difficulty getting a buy-to-let mortgage for a suitable property — banks are still keen to lend to landlords — but first I need to raise a deposit of at least 20 to 30 per cent of the purchase price.

Having seen how much my neighbours have just sold their unremarkable terrace house for, I reckon mine must have gone up by silly sums in the last few years. So I think to myself that I can easily remortgage the old family home to release some equity.

This is, I believe, one of the most common ways for amateur landlords to raise deposits for buy-to-lets, and as house prices in London and the South-East are marching upwards it makes total sense to unlock equity from one property to invest in another. At least, it does to me.

I've remortgaged several times since I bought my house 12 years ago and now have what I consider to be an impressive pile of mortgages stacked precariously one on top of the other. I figure I can add another to the heap without making too much difference. 

However, Martin is less impressed with my mortgage-juggling act than I'd hoped he would be, and he's not sure I will be able to add another chunk of borrowing to my game of keepy-uppy due to my lowly income, which is already stretched in every direction.

He points out that it's not as easy as it used to be to raise a mortgage on an owner-occupied property, even where there's plenty of equity. Apparently it's going to become even harder from April when new lending rules come into force.

From then on, mortgage advisers and lenders will have to adopt a more cautious approach to lending, which means they will start vetting applicants more thoroughly. 

They will also have to carry out an interest rate stress test to make sure that applicants will still be able to afford their mortgage repayments when rates do eventually rise. Spoilsports.

Martin says we should also expect lenders to take more interest in how we spend our cash. They're going to start poking around our bank statements, looking for signs of extravagant spending and gambling addiction. I tell him they will find nothing untoward in my statements — just too many trips to Sainsbury's Local and a fortnightly Abel & Cole delivery.

I plead with him to work some black magic and find a lender who'll give me a new, fatter mortgage on my house before April and he goes off to boil a goat. 

When he returns, he's still cautious. As I run a small business he wants to see my accounts. "Ah yes, right," I say, while opening a browser on my computer and Googling "how to create a profit and loss account".

Now I can see that I might have to resort to Plan B, which is to remortgage one of my rental flats. I gather this will be easier because buy-to-let mortgages are unregulated, so lenders don't have to be quite so cautious. But I suppose caution is actually a good thing when borrowing shedloads of money. After all, interest rates will rise eventually.

* Victoria Whitlock lets three properties in south London. To contact Victoria with your ideas and views, tweet @vicwhitlock.

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