'Buy to Let' in recent years has become an increasingly popular mortgage option for those wanting to invest in residential rental property. More people are now investing in property as a long term opportunity to hopefully make a profitable return, and as a way of securing an extra income in retirement.
The idea is that your tenants' rent will cover your mortgage payments as well as other expected overheads, such as landlords insurances and maintenance, and maybe letting agents fees.
When looking for a property, factors such as school catchment areas, local developments and transport links will impact on the attractiveness of a rental property. All sorts of people rent property, but primarily they fall into the following groups, Students, Professionals / working couples, Families, Tenants on benefits, Friends and family.
Landlords can choose between Interest only or capital and repayment mortgage loans, but there is a major difference in the criteria lenders apply when considering Buy to Let. The main criteria is the expected rental income from the property, and not the applicants income as in residential loans, although most lenders (not all) would require a minimum income of between £15k to £25k.
Rental income is typically required to be at least 125% of the monthly mortgage payment, and you will be required to put down a deposit, with a minimum being 20% of the property value, but a deposit of 25% would give you a greater choice of lender.
Lenders will also ask that the tenant is on an 'assured shorthold tenancy' with a minimum term in some cases of at least 6 months.
Bear in mind, when you see a property you are interested in, bargain hard. When investing in Buy to Let, you are effectively like a first time buyer with no property to sell, which makes you more appealing to any sellers.
What you need to think about before investing
It pays to look below the surface when working out whether being a landlord will add up for you. The risks of a Buy to Let investment include problem tenants, unplanned periods when your rental property is empty, rising mortgage interest rates, variable rents, tax liabilities, short term depreciation, and the possibility that your Buy to Let property could decline, rather than increase in value.
Whatever your mortgage needs are, contact us today to discuss your options!
Buy to Let mortgages are not regulated by the Financial Conduct Authority