Buy to Let Mortgages

Buy to let can be a good way to secure a healthy additional income. But it’s more complicated than you might think.

There was a time when people viewed buy to let as being an easy way to make money. It’s not. There are many factors to consider to ensure your investment will be safe.

 

Here are just a few:

  • There will be additional costs: As a landlord, you’ll have to arrange and pay for items such as insurance, ensure all appliances comply with relevant regulations and take on the cost of decorating.
  • Obligations: As the landlord, you will be obliged to ensure the property is maintained to an adequate standard.
  • Insurance: You may need legal insurance to cover the cost of evicting a troublesome tenant, contents insurance and landlord insurance.
  • Ground rent: There is a service charge on all leased properties..

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Mortgage companies will treat buy to let mortgages slightly differently.

  • Rent: They will look at how much rent you can potentially secure as well as your personal income.
  • Mortgage cost: Interest rates are slightly higher.
  • Deposits: Mortgages providers will normally require a higher deposit – a minimum of 20% to 25% of the property value.

Take all these considerations into account when planning your buy to let mortgage. As a rough guide you should aim to achieve a gross rent of 135% of the mortgage interest.

 

Make sure you have a clear goal in mind before taking on a mortgage. Are you taking it out in order to gain a second income through the rent or do you view this as an investment, with your return coming from increased equity in the property as it gains value over time?

 

The FCA do not regulate Buy to Let mortgages.