News Review: Buy-to-let
Buy-to-let mortgage protection still a tough sell By Yuan Phoon
the sale of protection on the back of residential mortgages should be a well rehearsed spiel covering the value of peace of mind and how the risks of the few are protected by the many. Buy-to-let landlords are
however a different type of customer to target for insurance. For them the magnitude of their premiums increases with the size of their portfolios and to cover a large portfolio worth around £5m, a landlord would have to pay an arm and a leg. Yet the complications that can arise for landlords should the worst occur are much more complicated. Ying tan, managing director at the Buy-to-let mortgage Business, said: “Buy-to-let protection has been a tougher area to penetrate than in residential. if someone dies, the inheritor will be far more likely to just sell the property. “one of the difficulties we
have is getting landlords to protect themselves from the worst case scenarios but it’s not an easy sell.” tan said the struggle was
that premiums would be high for a million pound portfolio and for landlords to insure against it in its entirety would cost them an arm and a leg. “But there are various scenarios where you might want to insure a smaller percentage of your portfolio. From a tax inheritance point of view, a landlord may have to consider a spouse who might not be as astute as a businessman,” tan continued. “You’re not only leaving
behind £5m worth of assets, you could also be leaving behind £4m worth of debt. even £1m equity in the hands of an inexperienced person can get eroded very quickly through fire sales, or there’s difficulties in getting tenants quickly, or a whole host of other problems. it’s something which a lot of buy- to-let landlords neglect.”
Market issue this is not a rare concern in the market. mike Fitzgerald, sales director at essex-based Brentchase Financial, says protection is an integral part of any buy-to-let sale to protect from the more regular risks of having a buy-to-let property all the way to buying time for worst case scenarios. “Protection add-ons are
really valuable to a buy-to- let property,” he said. “From buildings and contents insurance to emergency cover to protect from events such as a burst pipes and then landlords insurance to cover the more serious issues of tenants running off without paying rent. “any broker who doesn’t
spend a couple of minutes to go through the protection products associated with buy- to-let, is missing a trick.” Ben thompson, managing
“Buy-to-let pro- tection has been a tougher area to penetrate than in residential. If someone dies the inheritor will be far more like- ly to just sell the property... it’s not an easy sell”
director of mortgages at Legal & general mortgage club, also echoed the sentiment that landlords needed to focus on protection now more than ever. He said: “Protection is typically bought relatively more easily by owner occupiers due to the fact that in this example the customer is protecting his or her principal residence and family home. Both men and women recognise and acknowledge this as important. “With
although there are many compelling reasons why they ought to protect their property portfolios, their
Q2 2011
properties represent a form of investment and less so a home.”
Time is right thompson added that some landlords will simply look at the future resale of a property as an answer for what would have to happen if the worst came to the worst. He said: “With yields rising
at pace as rents climb and mortgage rates stay low, now ought to be a good time for landlords to think again and look into protecting the future value of what is often a very significant investment.” the financial incentives
for a broker are certainly there as well as the product choice. Provider Paymentcare recently offered mortgage brokers a whopping 30% commission on sales of a landlords only buildings and contents insurance policy, while research company defaqto revealed that 62% of buy-to-let insurance products were available via intermediaries. Buy-to-let is showing
landlords,
no signs of slowing down anytime soon however lucrative opportunities still remain out there for brokers ambitious enough to make the most on the back of the buy-to-let gold rush.
Buy-to-let mortgage offers in quarter three 2011 Q3 2011
Average rent: Average rental yield: Average chosen fixed rate: Source: The Business Mortgage Company 14 mortgage introducer NOVEMBER 2011
£1068.25 6.37% 5.03%
Average chosen tracker rate: 4.10%
£1009.87 -
4.82% 4.02%
Change during Q3 2011
+ £58.35 (5.78%) -
+0.21% +0.08%
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