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Buy to Let Mortgages

If you are thinking of becoming a landlord there are many things to consider. People choose to invest in property for a number of reasons.Perhaps utmost in the minds of most is the thought that letting out a property will provide a lucrative source of additional income.

If you are considering investing in property however, it is important to remember that it can be dangerous to your financial health if the property market falls.

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Buy to Let Process

Finding the right property is even more crucial than choosing the right buy to let mortgage. You need to think about which rental market you are aiming at. A letting agent can advise you if a property has letting potential and how much you can expect to get in rental income. This is key to ensure that you are paying the right price for a property and whether the investment stacks up. Weigh your likely outgoings including a realistic sum for maintenance and contingencies, against your likely rental income. Investing in property should be made with other investment possibilities in mind. Sometimes a property purchase fulfils a combined need such as housing a student offspring as well as being an investment – nevertheless it is still important to weigh-up longer-term letting potential and make a rounded investment decision.

The Association of Rental Letting Agents (ARLA) recommends that gross rents should be 130-150% of the monthly buy to let mortgage repayments. It also estimates that gross returns after costs are around 7-10%. This may be less for more expensive properties.  You have to pay income tax on rental income. Expenses, including mortgage interest, can be offset against this.

When renting out a property, one of the first things you need to consider is whether you are going to use a professional management company or handle all aspects yourself. Hiring a firm will cost money but this does take away the hassle of day-to-day management.

Buy to Let Costs

There are many costs involved when buying a house to let. These include:

• Stamp duty
• Legal fees
• Survey fees
• Land registry and assignment charges
• Mortgage application fee (if applicable)
• Professional fees for drawing up enancy agreements

Ongoing costs include:

• Buy to let mortgage repayments
• Management fees
• Letting fees
• Building and contents insurance
• Refurbishment
• Maintenance and repairs

Buy to Let Legal Considerations

There are many safety regulations and legal obligations involved when letting out a property. It is important to have an inventory schedule that details the condition of the property and any fittings and features. A tenancy agreement will also be needed. This is a legal contract between a tenant and landlord.

Buy to Let Mortgage Options

Buy to Let Mortgages are provided for property purchases for investment in the private rental sector. How much you can afford to borrow  is usually based on either how much you earn or the amount of rent expected from the property. Some lenders may also take your existing mortgage or other loans into consideration when offering you a buy to let mortgage.