Buy-to-let mortgages

Are you a would-be landlord?

The buy-to-let property market has really taken off in the last few years, the result of a combination of more stable mortgage rates, legislation that is now more favourable to landlords, and many more lenders being prepared to offer mortgages on buy-to-let properties. (Source: Paragon)

Buying a property to let requires you to step back and make unemotional and informed decisions about your purchase. It may not be what you would look for in a home yourself.

Long-term project
If you are actively looking to invest in property, you should certainly treat it as a long-term project. Buy-to-let doesn't stop at just buying a property. Once you own it, there are legal obligations to keep it in good order, which costs money. You have to make sure your purchase will be viable.

Consult an agent
Consider consulting a letting agent before taking the plunge. A local agent should have specific knowledge about the rental market where you are thinking of buying. An agent should also be able to tell you whether there is a need for more rental accommodation in the area, what types of properties are the most popular and in which precise areas. In addition, an agent should be able to deal with the tenancy agreement, tenants' references and the day-to-day problems that inevitably arise.

Arranging a mortgage
There are numerous lenders that offer buy-to-let products. Many lenders offer mortgages for people who want to invest in property and become landlords, including specialist buy-to-let lenders. These buy-to-let mortgages are similar to traditional products, but interest rates tend to be higher because the perceived risk to the lender is greater. Your deposit is likely to be higher as well, as most lenders don't offer mortgages of more than 80% of the value of the property.

You don't have to be a high earner to invest in property – as well as your salary, the lender will take the expected rental income into account when it calculates whether you can afford the repayments.

The expected rental income must exceed your mortgage repayment by a certain set percentage, the level of which depends on the lender. Some lenders only consider rental income, while others also take into account your normal income. The requirement for rental return might be anything up to 150% of the mortgage repayment.

Some buy-to-let schemes offer you the chance to buy more than one investment property. It is not unusual for borrowers to buy properties one by one, taking advantage of price rises to remortgage the previous property in order to raise a deposit for the next.

If you are considering purchasing a property to let or would like to add to your existing property portfolio, please e-mail or contact us for more information.

Did you know?
If you decide to sell a property that you have been letting, your profit is subject to capital gains tax
The average age of potential landlords is 31-40
63% of people use a letting agency to manage their property
The average price of properties bought to let is between £80,000 and £100,000

(Source: Paragon)

The Personal Investment Authority does not regulate mortgages. YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED ON IT. Written quotations available on request, subject to status. The past is not necessarily a guide to future performance. Buy-to-Let investments are intended as long-term investments. If you withdraw from these investments in the early years, you may not get back the full amount invested.