At The Mortgage Centre, our professional team give advice on buy to let mortgages and can broker buy to let mortgages from a wide range of the UK's leading mortgage lenders that represent the whole of market.
Buy To Let mortgages are mostly assessed on the rental income the property can achieve as opposed to your personal income.
PLEASE NOTE: We are unable to offer any comment on your requirements in respect of using property for investment purposes or with the risks associated with a purchase of this type, other than that both the return on the investment or the income it generates cannot be guaranteed, and both property values can fall as well as rise. Scroll to the bottom half of this page for further useful information.
We will be pleased to arrange a mortgage but, as mentioned above, cannot give advice on buying to let as a business proposition. Nothing in our illustration should be taken to indicate that buying to let is a suitable business proposition for any particular person. Before entering this market we suggest you consider the following:
1. Acquisition and Disposal Costs
You should satisfy yourself that the terms of the finance detailed in the offer letter are suitable for your needs. A suitable mortgage repayment arrangement should be in place to repay the mortgage within the agree term together with any necessary life or critical illness cover. Fees associated with obtaining the finance will be explained to you ‘up front’ and any that are non-refundable will be brought to your attention. You will need to consider stamp duty, conveyancing costs and agents fees. Allowance should be made for the cost of furniture and fittings.
2. Management of Property
You may be required by the lender to let the property through a member of the Association of Residential Letting Agents (ARLA). These agents provide practical assistance with selecting a property in a suitable locality, advising on rents, location of tenants and general property management. The services of letting agents will typically cost from 10% to around 15% of annual rents, excluding VAT. It may be possible to insure against loss of rent through suitable insurance cover provided by a general insurance brokerage. A suitable insurance premium would be required. Provision should be made for water rates, property insurance, maintenance and sundry expenses.
3. Political and Economic Factors
You should bear in mind the possibility that rent control for Assured Tenancies could be introduced. There could be a fall in the value of the property. Past performance is not necessarily a guide to the future and prices could go down as well as up. If the property has to be sold, you might not get back your original purchase price. There could be a decrease in rental income due to adverse economic conditions, or as a result of a substantial increase in the supply of rental accommodation in a particular area. Rents will also be affected by the particular locality in which the property is situated and by the condition of the property. Interest rates could increase on any mortgage taken to acquire the property, without a corresponding increase in the rental income to cover that interest.
4. Business and Investment Factors
There could be difficulties with tenants in breach of tenancy agreements, including failure to pay rent and in obtaining possession under relevant legislation. There may be periods when the property is not let and so no rent is receivable. Investing in a single property can result in a lack of spread, which should not usually be contemplated where you do not already have a good spread of investments in your portfolio.
The disposal of the property will be subject to capital gains under current legislation. The rental income will be liable to income tax, but any loan interest may be able to be set off against rental income for tax purposes. Appropriate advice should be obtained from your accountant about the taxation implications of letting property.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
A fee of £195 is payable on application. In addition, an arrangement fee of a maximum of £1,000, or 1% of the loan amount if greater, is payable on mortgage offer. Typically this will be £495, depending on your circumstances.