A Buy-to-Let mortgage is a secured loan you take out on a property that you intend to let out to tenants. The borrowing is assessed on the rental income to be generated from the property and not on the applicants income, as with a residential mortgage. Normally the lenders will expect the rent to cover the mortgage by approx 125%.
As this type of mortgage is classed as higher risk the minimum deposits are much higher than that of a residential mortgage. Typically, in the current climate, the minimum deposit would be 15%, but in order to obtain a competitive rate most lenders are asking for a 25% deposit.
Due to the potential increase in house prices, and the prospect of a regular income, the Buy-to-Let proposition has become a very popular way of investing money long term for pension planning or inheritance. However, it still has its drawbacks:
- There is no guarantee that the property will always have a tenant, so provisions would need to be made to ensure funds are available to pay the mortgage
- The property may need maintenance and repairs, pre-rental and during, which could be costly
- There are other costs that could be incurred such as lettings agents fees, license fees and insurance
- Additional Tax implications such as Capital Gains Tax – please consult a tax expert for further details
- Damage caused by tenants
For Buy to Let property you also need to ensure that you have specialist Buildings Insurance. We can arrange this for you and have access to some very competitive premiums.
If you are planning on buying an investment property, looking to let out your current home or have already done so, please get in touch on 01822 615 502 or use the Contact Us facility above.
Please note the Financial Conduct Authority does not regulate some forms of Buy-to-Let mortgages.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.