When it was announced that pension reforms would mean millions of older people being able to have more access to their savings as of last month, it was revealed that as many as a third were looking to spend their money on an investment in the thriving buy-to-let market.
A seemingly evergreen level of demand and steady income makes the asset class an attractive one for many. However, there are those who are now finding out that this sort of investment might not be as easy as they first thought. According to a new study from specialist mortgage lender Kensington, many do not even know the ins and outs of getting a mortgage to purchase buy-to-let stock.
Even at a basic level of obtaining a mortgage, many wouldn’t even know where to begin. While 44 per cent said they would use a broker and 28 per cent would go to their normal mortgage lender, another 28 per cent said they had no idea where they would even start with this issue.
On top of this, many other landlords are also largely unaware of how much it would cost them to get into the buy-to-let market. Some 47 per cent said they have concerns about not being able to make enough money to afford a mortgage, whether it be their deposit or the repayments, while 42 per cent worry that their investment might mean they would not have enough money in their retirement.
In addition, some 25 per cent said they were concerned about the tax implications of taking lump sums from their savings, while 21 per cent said they do not know the regulations surrounding buy-to-let.
This shows up the need to make sure the ins and outs of buy-to-let are better advertised. After all, with it being such a potentially lucrative and popular investment option, the market would be served well by potential investors having a better knowledge base.
“The outlook for the buy to let market is bright and the potential for further growth as pension freedoms come into effect is undeniable. However would be landlords will need to be realistic and it is worrying that so many are considering buy to let without knowing how to apply for a mortgage,” said Steve Griffiths, head of sales and distribution at Kensington.