Buy to Let Mortgages and Buy to Let Remortgages

In recent times, the market for investors wishing to put money into property in order to let the property out, has increased dramatically. The returns on this type of investment are very tempting, as property values continue to rise.

The majority of people who wish to apply for a buy to let mortgage already have property of their own, so may be in the know regarding how mortgages work. However, there are differences between a buy to let mortgage and a normal mortgage, which one of our but to let mortgage advisers would be happy to discuss with you.

With a high demand for rented properties and low interest rates, buying properties to let can be an attractive way of investing, and it buy to let mortgages are not just for professional landlords. If you have spare cash to invest, one of our buy to let mortgage advisors can help and advise you, by taking you through the whole process step by step, including making the most of your money.

Best Buy to Let Mortgages in the UK

Since there is now more demand for buy to let mortgages there are more deals available, such as discounted, fixed variable, tracker, flexible and even self certification mortgages, helping to make buying to let more accessible to more people.

A key thing to remember is that buying to let is not a short term investment, but if the mortgage and property are well looked into, then you should begin to profit in the medium to long term. Buying to let is not without risks and involves initial and ongoing costs including tax, insurance, legal cover, letting agents' commission, management fees, maintenance and repairs and service charges.

Why would I want to Buy to Let?

Buying to let properties is a great long term investment and has the potential to offer a good income and good growth.

The capital growth within the property market within the past 25 years has increased dramatically compared to any other field, although the increase in capital growth within the buy to let market is unlikely to be sustained at such a high rate of growth.

Investing in a buy to let property is popular for people wishing to save for a pension. The rent collected each month can be saved or used as a enhancement on your retirement income. The property can also be sold and the proceeds can be used as a nest-egg.

Finding the Right Buy to Let Property

The three most prominent features whilst looking at a property is the location, type and state of the property. Researching the area is vital. Questions that may be good to ask or find out, are; is the property close to transport link? Is there parking? Is it close to amenities like shops and leisure facilities? Don't be guided purely by your own preferences. Asking a local agent for advice on what's in demand in the area for rentals, whether it be family, one bedroomed or two bedroomed house or flat that's more popular.

The majority of tenants have high standards, making modern bathrooms and fitted kitchens a must. Unfurnished properties are in demand, but the house must be supplied with showers, fridges and washing machines, which are now expected as a standard. It may be worth paying that but extra for a property if it is in good condition, unless you are able to spend the time and money to redecorate or restore it.

Although you may have found the most amazing locations for your perfect property, letting may be unfavourable due to poor market conditions or lack of demand. But in order for you to cover mortgage payments and ensure that your buy to let mortgage is a successful investment, the property should be as continuously rented as possible. When you research, remember to cover the local demand for rental properties and try to estimate a future demand, to be as sure as possible that you will find tenants for your property.

How much will a Buy to Let Mortgage cost ?

Buy to let mortgage rates are different to the residential market. Lenders think of buying to let as a greater risk and demand a higher return, so buy to let mortgage rates can be up to one percentage point higher than residential mortgage rates. Deposits that are required are also higher that residential mortgage. The majority of lenders ask for at least 15% of the value of the property and this can rise to 50% on properties valued on or over one million pounds. It is worthwhile to remember the greater the deposit that can be left, the lower the interest rate will be.

If you decide to arrange your buy to let mortgage through a broker other than us, the may be a possibility of having to pay 1% of your mortgage value in broker fees.

Surveys and legal fees must be paid as with any property purchase.

There may be service charges in order to pay for maintenance and if letting furnished, money must be accessible for buying of reasonable quality basics. Very strict fire regulations disallow you using cheap second-hand furniture.

If you decide to use a letting agent, you will have to include the cost of this. Letting agents fees can be between 10 and 20% of the monthly rent.

Insurance is a very important factor to add on to the cost of buying to let. Insurance must cover building and contents, but also loss of income if the property has to stand empty, possible damage to the house by tenants or legal fees if it comes to evicting a tenant.

If your rental properties value increases, then unlike your home, it is liable for capital gains tax.

Some of the maintenance and running costs can be struck off against tax. For example, mortgage interest payments can be set against rental income.

Buy to Let Mortgages - What are the Risks?

Values of properties can go down as well as up, and unforeseen structural problems may prove expensive. However if you pick the right area and rational about returns, then you can reduce the risks involved.

The income received from renting property can vary, depending on whether the market is filled with properties similar to yours, or if your property is highly sought after in the area. Built into your rental fees, you need to build some leeway to allow for times when the property will be empty between lets and to cover maintenance costs.

A major negative for people buying property to let is the thought of the time required sorting our problems with tenants, such as broken washing machines or payments being defaulted by tenants. Having a good agent will reduce the hassle, and should take care of everything searching for tenants, checking references and managing an inventory and dealing with the unexpected problems like pipes bursting.

You can also get advice on tenancy agreements from agents. Most lenders require a six month assured shorthold tenancy agreement with your tenants. Arranging finance may be more difficult to let to students or more irregular tenancy periods like letting to companies or letting for holidays. Or there may be more problems if you plan to let to a DSS tenant.

Buying to Let and your Investment Portfolio

Within investment portfolios, a buy to let property can work excellently if balanced against all other investments including both short and long term.

Dependant on your initial deposit and level of your mortgage payments, you can affect whether you receive both income and final figure. If there are too many letting properties like yours in the area, or the mortgage rates rise, then you could be looking at taking a loss on the property, which is why when taking on a buy to let mortgage it is important to try to look at the longer term gains rather than short term.

If your investment profile is already full of different investments, then it may be best to contact an independent financial advisor to find out how this will improve your investment portfolio. If you have previously invested in a buy to let property then it may be a good idea to visit an independent advisor and they can check that you are paying a competitive rate of interest. The Bank Base Rate fluctuates, so it might turn out that you are paying more than you should and they can check that your rent money may be too high, making your buy to let property less appealing to prospective tenants.

Remember that buying to let is a long term investment. This is not a solution if you are looking for short term gain.

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