Mortgages

Buy to Let Mortgages

For buyers/landlords investing in rental properties in the UK

If you would like to becom a Buy to Let Landlord we can arrange for a Buy to Let mortgage advisor to contact you they will find the most suitable mortgage by comparing rates with Buy to Let Mortgage lenders.

An independant Whole of Market mortgage broker will be able to help you pick the Best Buy to Let mortgage.

This means your mortgage advisor will have access to the entire Buy to Let market and are able to offer many semi-exclusive deals.

If you are new to the property rental market and buy to let in general then your mortgage advisor will be happy to answer any questions you may have. They will guide you through the entire process and can offer great deals on conveyancing. However, you may know exactly what you have in mind and would like to have a buy to let experts offer you a Free, No Obligation, Quotation.

Information to become a Buy to Let investor

We also have another useful page dedicated to property investment. To become a Buy-to-Let investor you will need to start on a property search. You could do this yourself or if time is an issue instruct a letting agent who may do this for you by instructing their own sales department or some estate agents that they work regularly with in the area you have earmarked.

Once some properties have been found, the letting agent will then confirm with you which properties have suitable letting potential. They will also be able to discuss with you the likely rent that can be achieved in current local market conditions and advice on the current need in the arera. The letting agent will also be able to offer guidance and advice regarding and need for re-decoration or which new fixtures and fittings would attract good or better tenants and also reducing the risk of lengthy void (empty) periods.

What are the returns from Letting Property?

Gross returns - This is the rent received before taking account of the cost of letting - such as management fees, maintenance, service charges ground rents and insurance, can vary between 4% - 10%. These returns can reduce further when dealing with very expensive properties.

The average current rental return however in Britain today is around the 4.75% mark. Remember also that the capital appreciation can further enhance returns over time.

What should my rental be in comparison to my mortgage?

Generally if looking at your mortgage being 70% - 75% loan to value then your gross rents should be between 120% and 125% of the monthly mortgage payments.

What other costs should be taken into account?

Other costs include letting agent's commission and management fees, Insurance including (Building/Contents/Rental and Legal Expenses Cover), the costs of keeping the property in a marketable condition, service charges and ground rents - if a leasehold. (The tenant is responsible for such items as utility accounts, Council Tax and TV licence fee etc.)

Do's and Don'ts of Buying to Let

Do's

Do your homework, not only regarding the best mortgage deal for you but which area to purchase your property (s) in to give you the optimum return. Ask all the local estate and letting agents their advice on local market demands.

Make sure you do some basic calculations first. Will the rent cover borrowings and costs, after allowing for any void periods, (times when the property isn't let, or between change of tenants)?

If using a rental or letting agent look for an ARLA member as your letting agent. All these agents are bonded and have Professional Indemnity Insurance. Their staff are trained to ARLA's competency standards and are profitient with the latest legal and regulatory requirements.

Don'ts

Don't allow your personal taste to get in the way of your judgement in interior design and decoration. Investigate the use off-the-shelf tenancy agreements.

Don't purchase a property with potential maintenance issues. These could include lots of woodwork or large gardens, (where you are often required to supply a gardener). It won't add to the rental value and may cost you a lot to keep up.

Don't forget to issue the correct notices or forget to have a proper inventory and condition report made before a tenant moves in.

What difference does a Letting agent make?

For most buy to let investors they will be looking for a specialist buy to let mortgage product. As such many mortgage lenders look for an ARLA letting agent to help in finding a suitable tenant and credit checking them. By using a reputable letting agent will show your lender that you are taking the right steps in find and then renting out a suitable property.

Experienced letting agents will know the local market for suitability of properties and the demand for particular properties in certain areas, e.g two-bedroomed flats, or four bedroomed houses, or for properties close to schools or transport links or secluded properties with gardens. The agent will know the standard of decoration, furnishing, fixtures and fittings required.

Refererences need to be taken to ensure that the tenant will be good for the monthly payments on time and leave the property in a good state. Full management can also be undertaken by the agent but this can be done by yourself saving you money on fees.

How are mortgages arranged for Buy-to-Let?

Buy-to-Let mortgages are subject to the usual status checks as standard mortgages. Loans can be arranged for terms of between five and 25 years and for up to 75% of the value of the property. By using an ARLA member letting agent rents achievable from an investment property can be taken into account when applying for the mortgage so your own personal salary details etc may not need to be taken into account. You will find that lenders are often more secure in the knowledge that a reputable agent is dealing with the letting of the property.

What happens after Buying to Let?

Once you have purchased the property you then need to find a tenant. You could use a letting agent and pay a finders fee. They can then offer you further services including making an inventory, (that is detailing everything within the property it's contents and conditions), making changes to utility accounts and Council Tax. You can then have a part or fully managed service for the duration of the tenancy and this can include rent collection only, or full maintenance of the property with the letting agent dealing with all repairs and re decoration where necessary.

Can a Buy-to-Let investment be protected?

Yes there are now various insurance policies available for rental protection. This would cover you if a tenant defaulted on the rent and would also cover you for legal expenses. There are also specialist building and contents insurance products for landlords..

Tax and allowances

There are many tax and allowance deductions against tax that can be made against rents received. These include interest on mortgage payments and costs of maintenance, such as agent's commission, insurance, cleaning, gardening and other reasonable management expenses (but not improvements).

If you are furnishing the property initially then the cost of furniture fittings and fixtures is not allowable, but the cost of replacements may be claimed in the future, or a 10% allowance of the rent for wear and tear may be deductible.

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