If you’re considering taking out a buy-to-let mortgage, it’s important to understand the risks and costs involved. This includes Stamp Duty Land Tax and Capital Gains Tax. Other expenses to consider include letting agent fees, property maintenance and Council Tax.
Before you decide if buy to let is right for you, weigh all the pros and cons. Buying a property to let can be a great way to generate income, but there are some risks involved that you need to be aware of. Make sure you have a realistic idea of how much money you can make from rent, and be prepared for occasional periods where there is no rental income.
Anyone who meets a buy-to-let lender’s affordability and eligibility requirements can apply for a buy-to-let mortgage. Generally, lenders prefer applicants who already own a property. Still, more lenders are beginning to recognise the need for first-time buyer buy-to-lets or for those who have accommodation provided by their employer but still want to buy a property for investment.
There are a number of factors that might rule some applicants out, depending on which lender they approach, but with access to 1000s of mortgage options it may be possible to find a specialist provider whose buy-to-let mortgage criteria, terms and conditions are flexible enough to offer you a favourable deal. Bad credit, age, property type and income are all factors that could be taken into account by lenders, so it’s important to get advice before you apply.
One of the biggest differences is that the amount you can borrow is linked to the rental income you expect to receive from the property. Lenders will typically need the rental income to be 25-30% higher than your mortgage payments, so you’ll need a good idea of expected rental income before applying for the mortgage. It’s also worth noting that some lenders expect you to have an annual income of at least £25,000 to qualify for a buy-to-let mortgage.
If the projected rental income doesn’t cover the mortgage payments, some lenders may be willing to offer what’s known as top-slicing. This is where they use your personal income to top up any rent shortfall, to make up the loan amount they need. However, this obviously comes with some risks and is only likely to be an option if you have a very high income.
So, to establish whether a buy-to-let mortgage is affordable in your circumstances, you need to consider how much you can borrow. This will depend on factors such as your expected rental income and your financial situation. We would be happy to support you with any of this just drop us a call.
When it comes to interest rates and payments on buy-to-let mortgages, there are a few different options to choose from. The most common type of mortgage for a buy-to-let property is an interest-only mortgage. This means that your monthly repayments will only cover the interest on the loan, and the actual amount you borrowed will not be paid off unless you sell the property or pay off the loan another way.
When it comes to interest rates for buy-to-let mortgages, there is definitely a higher risk factor involved that lenders take into account. This means that you can expect to face higher interest rates than if you were taking out a mortgage for a residential property.
One of the reasons for this is that landlords often face problems with rent collection. It’s not always guaranteed that your property will constantly be occupied, so the lender has more of a risk.
However, it’s still worth shopping around to see if you can find a good deal on a buy-to-let mortgage. There are some lenders who are more willing to offer competitive interest rates, so it’s worth getting advice before you commit to anything. And remember, even with the higher interest rates, a buy-to-let mortgage can still be a great investment.
When it comes to buy to let properties, one of the things that landlords must take into account is the potential for void periods. This is when the property is not generating any rental income, and can be a costly issue to deal with.
Landlords can do a few things to help minimise the chances of experiencing a void period. Firstly, it’s important to add some cushion for potential voids into your budget, so you’re not caught off guard financially if this happens. Secondly, landlords should keep their properties in good condition, so they can quickly get them re-let if necessary.
While void periods can be a nuisance, they’re definitely not something that landlords need to panic about. Being proactive and taking some simple steps can help minimise the chances of this happening.
Some lettings agents will provide you with rent guarantee, which will prevent you from having to ever worry about void periods, find out more here
When it comes to income tax on rental properties, you will be charged at the same rates as you would be on any other type of income. The only difference is that your net rental income will be added to any other income you receive to determine how much tax you need to pay. This means that you should make sure you keep track of all your income and expenses related to your rental property, so you can accurately calculate how much tax you owe.
Overall, taking out a buy-to-let mortgage can be a great investment, even though some risks are involved. By being aware of these risks and taking steps to minimise them, you can still enjoy the many benefits of owning a rental property. These benefits include the potential for high rental incomes, the ability to build equity in the property, and the potential for capital growth over time. So if you’re thinking of taking out a buy-to-let mortgage, make sure you get professional advice before making any decisions.
We’re here to help you through the process of finding a new mortgage, no matter what stage you’re at! Give us call.
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Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.
Expert Mortgages is a trading name of Expert Mortgages Herts & Cambs Ltd which is an appointed representative of Mortgage Advice Bureau Limited and Mortgage Advice Bureau (Derby) Limited which are authorised and regulated by the Financial Conduct Authority.
Expert Mortgages Herts & Cambs Ltd. Registered Office Address: Hardcastle Burton, Market Hill, Royston, United Kingdom, SG8 9JN. Registered in England Number: 13095386.
