Providing unique buy to let advice -- unique to you
There are 3 main differences in buy to let mortgages:
Rent Potential
The decision as to whether or not a mortgage will be offered is usually based on the rent you will earn as well as your income.
Larger Deposit
Typically a minimum of 20% or 25% of the property's value is required as a deposit.
Interest Rate
Buy to let mortgages have slightly higher interest rates.
When buying a second property to let, you will need to decide whether your primary objective is income or capital growth. In other words, are you looking to make a profit month on month or are you looking to make a profit through increased equity from the second property if it increases in value over time? The decision may affect the type of property you purchase, and the location.
When you manage a property there are many costs involved in addition to the monthly mortgage repayments. As a guide, you should be aiming to achieve a gross rent of about 135% of the rental property’s interest only mortgage repayments in order to cover your costs should anything go wrong.
These additional costs include:
Property upkeep
Maintenance costs for the property.
Ground rent / service charges
Applicable to leasehold properties.
Insurance
Building insurance and contents insurance for the items provided as part of the rental agreement.
Letting agent's fees
Letting agents charge around 10% of the monthly rent for finding and vetting tenants with an additional cost of around 5% if you require a full management service.
Legal insurance
To cover costs from evicting tenants in the event of non-payment, very important, as this can be very expensive.
Furnishings
The purchase of any furniture. If the property is to be let furnished, make sure you are covered for this by your home insurance.
Gas / electrical appliances
Cost of maintaining appliances and ensuring they comply with any regulations such as safety tests.
Decorating costs
The property may require work ranging from painting, to a new bathroom suite before it is suitable for letting to tenants.
Location Advice
When choosing a property to let, it is wise to take advice from local letting agents to determine; what types of properties are in need and which parts of the town are best or most wanted.
When buying a second property to let, you will need to decide whether your primary objective is income or capital growth. In other words, are you looking to make a profit month on month or are you looking to make a profit through increased equity from the second property if it increases in value over time? The decision may affect the type of property you purchase, and the location.
When you manage a property there are many costs involved in addition to the monthly mortgage repayments. As a guide, you should be aiming to achieve a gross rent of about 135% of the rental property’s interest only mortgage repayments in order to cover your costs should anything go wrong.
The Financial Conduct Authority does not regulate most Buy to Let Mortgages