ThinkIFA guide to the ‘Buy To Let Mortgage’
What are buy to let mortgages?
Buy to let mortgages are intended solely for the purposes of buying a property to let, which is still considered an attractive option today given the stability of the housing market and the buoyancy of the rental sector.
As ever, with any kind of mortgage, research is vital. You would need to ensure that your rental income will comfortably cover your mortgage repayments and any other expenses. Most lenders will expect a rental income that is over your mortgage payments and the percentage required may differ between lenders.
Interest rates are also likely to be higher than with residential mortgages because of the extra risk factor involved in letting out a property.
When calculating your costs you must factor in all the other expenses of buying to let including:
- Maintenance and Repairs
- Refurbishment Costs
- Letting Agent Fees
- Landlord Insurance
- Empty Periods (where the property is waiting for a new tenant and you have to cover the mortgage payments yourself)
A buy to let mortgage is seen very much as a long-term investment. There is always an element of risk involved however, as the house market can fall significantly as well as rise, as was seen in the last credit crunch which hit investors hard.
Let to Buy
An increasing number of people are moving home and letting their current properties. To do this you usually need to remortgage your home under a new mortgage deal which can release some money for you to use, perhaps as a deposit on your new home.
The new mortgage will need to be specifically a buy to let mortgage, although you can sometimes work out a deal with lenders for ‘consent to let’ on a mortgage.
Letting to buy is seen as a short-term solution until the market improves and you can sell your home.
Seeking professional advice on buy to let mortgages or gaining consent to let is a must. Advice differs widely and banks will tend to promote their own products whereas an independent financial adviser will have access to a much wider range of mortgage providers and will scour the market on your behalf.
What should I do now?
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