Buy To Let Mortgage
There are increasing numbers of
lenders who have loans and mortgages tailored
specifically for the buy to let market. Some of the best
deals are from specialist Buy to Let lenders and are not
directly available to the public.
Buying a property to let can benefit the private
landlord in two ways. Firstly, it can provide a stream
of income. Secondly, many Buy to Let landlords purchase
property because of the potential for long-term
accumulation of capital growth.
There are 3 main differences between residential
mortgages and buy to let mortgages:
1. Rent Potential - the decision as to whether or not a
mortgage will be offered is usually based on the rent
you will earn although some lenders may take your income
into account.
2. Interest Rate - buy to let mortgages have slightly
higher interest rates.
3. Larger Deposit - typically a minimum of 15% of the
property's value is required as a deposit although some
lenders may accept a 10% deposit.
Becoming a private landlord should not be seen as an
easy way of making money. It can be risky and
complicated. It can also be very time consuming, more
than most forms of investment, and there is no guarantee
that house prices will continue to rise. That said
having a second property to let to tenants could reap
considerable financial rewards over time.
They always say past performance isn't a guide to the
future. But there's no denying it, property has been a
great success story for those who get it right - over
the last 25 years UK property prices have risen more
than 9% per year on average (according to Barclays
Capital).
As well as the purchase costs of the property you need
to budget for stamp duty, legal fees, surveys,
decorating and refurbishment costs, as well as any
mortgage fees.
When you manage a property there are many costs involved
in addition to the monthly mortgage repayments including
things like repairs, insurance, service charges, council
tax, plus your agents letting or management fees (if you
use one).
As a guide, you should be aiming to achieve a gross rent
of about 135% of the rental property's interest only
mortgage repayments in order to cover your costs should
anything go wrong and to allow for void periods (periods
when the property is not let). The gross rent
calculation is used by most lenders to determine whether
a mortgage is offered, most expect 125 to 130% although
one lender will accept a gross rent as low as 100%.
Just like any other investment, there'll be tax to pay.
You can offset your expenses against your letting
income, to reduce your tax bill. You need to also pay
Capital Gains Tax if you sell your property. We'd
suggest you get advice from a specialist tax adviser on
this.
Buying a property to rent out is very different to
finding a home for you and the kids, so take care not to
get carried away imagining yourself snuggled up on the
sofa, lounging in the garden, or cooking in that luxury
kitchen. Remember it's a business venture from the
start.
When choosing a letting agent to act on your behalf it
is very sensible to choose one that is a member of the
Association of Residential Letting Agents (ARLA). The
reason being, all members of ARLA must join in a bonding
scheme to protect rent and tenant's deposits. The bond
provides total compensation of up to £2 million a year.
To find out more please complete our simple online
enquiry form
today and we will
contact you to provide a free no-obligation quote, so
what have you got to lose?
Buy To Let Mortgages are not
regulated by the Financial Services Authority.
------------------------------------------------------------------------------------------------------------------------------------------------ |
