Rent guarantee insurance has always been one of those easy-to-put-off decisions for investors. While it seems like a very good idea, its all too tempting to divert the money to another cause. In volatile times, however, its sensible to reappraise how it might be of assistance from time to time. So, in this report, we will look at what rent guarantee insurance is and how useful it might be.
Rent guarantee insurance, of course, is most likely to be of interest to property investors who depend on rental income to pay a mortgage and other outgoings. Interestingly, the number of properties that were bought with buy-to-let mortgages increased by around 84,000 in 2011, according to latest data from the Council of Mortgage Lenders (CML). But their statistics also point to the fact that a number of landlords have been caught out by a shortfall of rental income compared to mortgage outgoings over the last few years.
The latest CML figures show that the total number of properties taken into possession by first charge mortgage lenders in 2011 was 36,200 (the lowest annual total since 2007). However, BTL properties accounted for 5,900 of the repossessions in 2011, compared to 4,700 in 2010.
Interestingly, the repossession rate was 0.31% on owner occupied homes but 0.42% on BTL properties. This is despite the fact that BTL borrowers had a better arrears performance than owner occupiers. The three month arrears rate at the end of 2011 was 2.06% amongst owner occupiers but as little as 1.38% amongst landlords. Which might suggest as many landlords suspect, that lenders are less forbearing with them - and that some kind of contingency arrangement to ensure mortgage repayments are made is certainly a good idea.