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Everything you need to know about Buy to Let mortgages
This guide highlights some of the issues you need to consider if you are buying a rental property for the first time.
Buying to let can be a great investment, but it isn’t always a simple matter of buying a property, putting in some tenants and waiting for house prices to go up. It’s important to ask yourself a few hard questions before you go ahead.
Buying as an investment
Rental property can be an attractive alternative to other forms of saving or investment, such as stocks and shares. The benefit of Buy to Let is that by renting the property you can cover the repayments on your additional mortgage. But it’s important to remember that property prices aren’t guaranteed to rise and can in fact fall.
If you’re new to the rental market, it’s worth bearing in mind that there will be times when you have no tenants in the house but will still have to keep paying the mortgage. And don’t forget that you will also have all the usual costs of keeping the property in good condition. In other words, make sure you can afford your mortgage repayments, even if things don’t always go to plan.
If you’re considering Buy to Let, ask yourself these questions:-
• Can I afford the deposit?
• What if I didn’t have tenants for three months? Could I still pay the mortgage?
• Would I be able to sell the property easily if I had to?
• Is the property in an area that would be attractive to tenants?
• Am I relying on property prices going up? What if they stay the same or even go down?
Where and when should I buy?
Location is always vital with property and is no less important when buying to let. Fully research the Buy to Let market before you get involved.
Consider starting locally in an area you are familiar with where you can establish what sort of properties let quickly and how much they rent for.
There is currently a strong nationwide trend in the amount of people choosing to rent rather than buy a property, but make sure that you assess the local market carefully and that it doesn’t already have a surplus of homes to rent.
Be aware of your ultimate goal
Buying an additional property is an investment, but consider your reasons for moving into the Buy to Let market beforehand. Are you simply looking for a quick return? Or is it a longer term means of generating monthly income?
Remember that it’s a business investment; you are not going to live in the place yourself. It’s important to always think long-term, if and when you look to sell the property in the future, will you get the return on investment you expect?
Finding a letting agent
Once you’ve found your property, it’s time to find a letting agent. Unless you’re planning on being a full-time landlord, it is likely that you’ll use a letting agent to find suitable tenants and collect your rent. The agent will also draw up the relevant documentation. Agents fees are usually taken out of the monthly rent and they normally charge around 10%-15%, depending on the level of responsibility you give them.
Landlord responsibilities
You still own the house, so you’re responsible for its maintenance but your daily tasks as a landlord will depend on what you agree with your letting agents. Discuss your responsibilities with the agent you choose.
How much can you borrow?
In most cases, unlike an ordinary residential mortgage, the amount you can borrow with a Buy to Let mortgage is based upon the expected rental income rather than your personal income.
Loans are normally available up to a maximum of 90% loan to value. If you require a quotation or assistance with how much you can borrow please contact us.
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