There is a lot of change happening in the world at the moment that affects the housing market in Chelmsford. If you are a landlord and have investment properties that are currently rented out you have probably experienced and noticed the huge increase in tenant demand and therefore rental values in Chelmsford in the last 18 months. On the surface this seems like a great position to be in and in terms of pure income then it is great to be able to achieve higher rents against the property that you own.
If however you are in a position where you have a mortgage that is due to finish its fixed rate in the next few months you could be in for a bit of a shock in terms of either the standard variable rate that your mortgage product will move on to or the rates for new mortgage products that you may either choose to switch to with the existing lender or to remortgage to a new lender. Both options will have a significant impact on your mortgage expense. It is always good to talk to a whole of market mortgage broker to make you aware of all your options and whilst we are not giving direct mortgage advice, it is important to stay aware of mortgage rates and product availability.
We have seen stories in the press recently of not just increased mortgage rates but also far higher stress tests being applied during the mortgage application process to filter out some deals that previously would have been accepted by lenders. Whilst you may be attracted to the initial mortgage rate being offered you really need to check the details to see if you / your property qualify for their criteria. If you don;t qualify for certain mortgage products you may well consider that you need to sell your property.
With higher rates you could then look to pass on some of that added cost to tenants in terms of rent increases however this can only be done to the market value and only within certain timeframes as well so some of the added mortgage cost might have to be absorbed by the landlord as well.
When looking at investment properties that have been bought with a mortgage in recent years how the property is owned has a huge impact on what you can do with that mortgage cost and whether it can be fully deducted as an expense against the property. Section 24 is the legisalation that restricts individual owners from fully deducting their mortgage costs if they are a higher rate tax payer. With higher interest rates and payments comes an increasing cost to which not all of it can be allocated to your expenses for the property.
It is predicted that this extra tax burden on landlords will continue to have an impact and many landlords would look to sell their property and remove it from the rental market thus reducing options for people that will still look to rent. Again the end result of this will be increased rents for tenants through a shortage of properties and continuing landlords faced with higher tax bills as well.
One option could be to look to sell the property with tenants in situ however this again may prove to be problematic especially if others are in the same positon as yourself and struggling to get mortgage finance to purchase your property even if on paper it looks to be a good deal.
If you have one or more investment properties in Chelmsford and want to get an up to date market appraisal for your property we would love to hear from you and talk through your different options. Please speak with Trefor or Louise on 01245 830003.
