Are you thinking of buying to let?
You have identified a property that you want to buy for investment or wish to let out your current home and need to arrange suitable finance. Finding the right mortgage deal is extremely important and some lenders will treat First Time Landlords differently to experienced landlords.
Buy to let mortgages differ from owner occupier mortgages in many respects.
These differences include:
- Rental value - the decision as to whether or not a mortgage is granted and the size of the loan is usually determined by the rental value of the property and typically your marginal rate of tax.
- Larger deposit - typically a minimum of 25% of the property value is required as a deposit, however regional differences may impact on this.
- Evidence of earned income - most lenders require documentary evidence of additional earned income to support void periods when the property is not let.
- Method of repayment - generally available on Interest Only or Repayment basis up to 75% of the property value.
- Age limits - typically from age 21 to 75 (some lenders have no upper limit).
- Interest rates and arrangement fees - buy to let rates and arrangement fees are generally higher than owner occupier mortgages. Fees quoted range from £500 up to 3% of the loan amount.
- Condition of property - not only must it be habitable, it should be in lettable conditional at the time of application (short term finance may be available to facilitate refurbishment).
- Regulation - most buy to let mortgages are not regulated by the Financial Conduct Authority (FCA) which means that customers do not have the same level of protection available to them in the event of a complaint or dispute.
When buying a 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 hoping to make a capital gain as the property increases in value? Your decision may affect the type of property you purchase, the location and the price.
Local letting agents can offer a wealth of information and guidance to determine the types of property in demand and desired location.
Finally, you should seek advice from an accountant as to how you should structure your investment, i.e. personally or via a Limited Company.