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Buy to letWhy buy to letBuy to let mortgages have come of age. Many home owners have direct experience of profiting from property, a buy to let mortgage enables you to benefit from rising property values and have your mortgage paid at the same time. Buying to let is no longer the domain of rich landlords, the prospect of buying and letting a property is now within the reach of many people With interest rates at historically low levels, and stock markets uncertain, investing some money into property can make sense. Like any investment, a property that you buy to let has its risks and rewards. If you take advice and plan your buy to let carefully the risks can be minimized. Buy to let mortgages enable the investor to benefit from capital gearing. You invest a relatively small fraction of the value of a property, but you benefit from the capital growth of the full property value.
This example assumes that your mortgage costs and expenses are covered by rent received. The costs of buying and selling are omitted. Where to Buy to LetAn important consideration is to be sure that the property is suitable for letting. Is there good demand for accommodation to let. Consult several local letting agents and ask their opinion, find out what is the going rent. If you find a responsible letting agent you might prefer that they manage your property. Consider the worst case scenario, what if you cant find a tenant, what if the tenants decide not to pay, what if they damage your property. These are all questions a good letting agent should be able to answer. How to Buy to letIf you do not have the funds to outright purchase a property then you will need a mortgage. Where previously borrowers were restricted to commercial mortgage lenders, nowadays the buy to let mortgage marketplace is quite competitive and the lending rates approach those of the mainstream lenders. You will need a deposit of at least 20% for a buy to let mortgage (15% in some circumstances) and additional funds to cover survey fees and legal expenses. Another option to consider is a 'let to buy' mortgage where you let your current home and buy another at up to 90% loan to value, if this is of interest complete the factfind All lenders will require you to have an income, this gives the lender piece of mind that the mortgage will be paid even if there is no tenancy in place. Some buy to let lenders require that your income covers both your existing property and the let property. Other lenders just require that the rent covers the mortgage payment by a set percentage. You can buy to let several properties, a strategy often pursued by professional landlords is to buy properties one by one using the equity in the previous property as deposit for the next. Buy to let costsAs the landlord, you will be responsible for the upkeep of the property, and the tenants may reasonably expect you to foot the bill for any repair work. The costs for this must be taken into consideration when you set the rent. Letting agents will commonly charge 10-15% of the rent as management fee. As well as your buy to let mortgage there will be associated insurances to consider, for example life and buildings insurance. Finally, be aware that the inland revenue regard any net income or capital gains as taxable. Information regarding the treatment of income tax can be obtained by requesting the following booklets:
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