Buy To Let Mortgage

Buy to let mortgages are for property you wish to buy and then let out for rent to third parties.

It is important when evaluating the property the potential extent of maintenance and management costs as this will be paid by you from the rental income.

In theory the monthly rental income you receive will cover the cost of the mortgage payments and help cover the cost of the maintenance and the management costs. This is the theory but you have to be aware that you are responsible for the payment of the mortgage irrespective if you have rented the property or not and if your tenants have defaulted.

Questions worth asking yourself are:-

How will you cover the mortgage payments if the property is unoccupied for any period of time?

Another potential problem is if the interest rate increases on the mortgage and the rental income no longer covers the cost of the mortgage repayments

You are responsible for general deterioration of the property and you should budget for unexpected expenses by having a contingency fund to call on as and when required.

Renting out property can affect the Income Tax you pay and you should seek your advice from your accountant prior to taking the loan.

You should also consider the worst case scenario if your tenants default and you have to go to court to take action to recover rent and to evict them.

Mortgage lenders who offer buy to let mortgages usually have their own conditions such as a specific short term tenancy agreement and the appropriate levels of cover for insurance before they will lend Mortgage lenders offering buy to let mortgages will expect your expected rental income to exceed the mortgage payment by at least 20% and in some cases 30% this is assured by a qualified valuer.

There were fears that the Buy to Let Mortgage was over heating but this has proved to be incorrect and provided you research your market with regard to the rental income and the ability to secure tenants quickly then you should be safe. Many older investors are investing in Buy to Let mortgages so as to build a portfolio of property which should on average increase in value. Investing in property is generally seen as a good investment as long as you don’t try to build to quickly. Two main areas of buy to let mortgages are being offered to property in University areas and for commuters who want to rent property in suburbia.

You should always take advice before you commit yourself to borrowing from a lender for a buy to let mortgage.

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