Buy to Let Mortgages

Buy to let mortgages have become a popular option for investors looking for a healthy return on their capital through property. The days of having only five lenders offering these mortgages are well and truely over.
High street banks and building societies are willing and able to offer their BTL products to buyers who fall within their set criteria.

You will need to research your market - there is no point in buying a property in an area that has little demand for lettings. Speak to letting agents and avoid areas that are struggling. Although it is popular with television companies to show buyers with properties that need complete overhauling, it is often far cheaper in the long run to buy a property that is ready to be rented out immediately, as you will not be living in the property you can afford to be less emotionaly involved. It is surprising how easy it is to barter with the vendor over price if you feel you can walk away.

Most lenders will ask that the rental invome is not less than 130 per cent of your monthly mortgage repayments. You will be looking to borrow around 77 per cent of the expected rental income. Lenders will often lend up to 75 per cent loan to value but you may be able to secure as much as 85 per cent. If you go for a low fixed rate to start with you should bear in mind that your rental income may not change drastically and once your mortgage deal has expired you will still need to make the repayments.

You may be asked for a letter from a letting agent as proof to the lender as to how much your property is expected to earn and some lenders will insist that you use a letting agent to manage the property for you. You could opt for a finders fee only. This will usually include the setting up of direct debts and credit references. This can be very expensive although costs vary from agent to agent it can be as much as 15 per cent of the monthly income. The rental income is taxable and will be added to your earnings. There are, however, a number of expenses you may be able to claim and these include a 10 per cent allowance on a furnished property, letting agency fees, interest costs and repairs to the property. You must also insure that you have the right type of insurance for landlords. Legal expenses can be inlcuded on policies should you need to take a tenant to court.