There are many reasons that people choose to go down the Buy-To-Let route, the main reason being to invest in the future. Recently, there has been an increase in people buying properties then renting then out to cover the mortgage.
Other benefits to doing Buy-To-Let:
1 An investment in the future and a chance to earn a monthly income.
2 You can use your Buy-To-Let as a pension
3 You can maximise return by capital gain and rent received
4 Spread your investment across a portfolio of properties
The key differences between Buy-To Let and a normal property mortgage
When you are looking for a home you will be talking to banks about a mortgage that will be paid of monthly. You will have saved up a deposit (usually 10% of the price).
Whereas a Buy-To-Let mortgage is a secured loan or mortgage for investment. These types of mortgage involves specific lending criteria and you can expect to pay higher interest rates.
Banks will also use a different calculation to work out how much can be borrowed, they may also take into consideration the potential rental income. Typically lenders will expect the rental income to be 25% higher than the mortgage repayments so take this into consideration before applying.
Things to consider when doing buy-to-let
Landlord insurance is a legal requirement to own a buy-to-let property, if you are mortgaging the property and is also for your own security. You should definitely consider landlord insurance. Even if you intend to rent the property to someone you know, landlord insurance will protect you and your tenants. Landlord insurance will pay if:
- Your tenants don’t pay their rent (depending upon your policy)
- The property is damaged
- Claims against you if someone in the property is injured
The importance of a proper tenancy agreement
Having a proper tenancy in place will protect all the parties involved. Even if you are renting to a friend or family member, a proper tenancy agreement will ensure that there are no awkward situations. Not having a tenancy will drastically impact any court case you might have against them.
Another important things to note while buying buy to let property which includes:
- Affordability is based on rental received and not on applicant’s individual income
- Can be purchased with no income
- Foreign nationals can even buy property in the UK
- Help generate monthly income
- Option to purchase under individual name or under Limited company
How can you ensure you get the right mortgage?
It can be a worrying time when looking for mortgages, you might be worrying about taking the wrong loan or paying to much interest. That is why a lot of people go through a broker, so that they can talk through the options with someone who has your best interests at heart. Funding Hut have contacts at a lot at mortgage providers so you can be sure you will get the perfect mortgage for you.
- Funding Hut deal in whole mortgage market
- Can help provide lowest rate and best suitable product for the client
- Deal with complex cases on a regular basis
- We help our customers from start to end
- The Funding Hut team have wealth of experience in this industry
How will Brexit effect the housing market?
A lot of people are concerned about whether Brexit will have an impact on the housing market.
There is a lot of uncertainty around Brexit at the moment and what impact it is going to have on the housing market. There is a lot of people asking whether they should buy now or wait until the UK has left the EU and see what the market looks like. The future isn’t mapped out, if you are in the position to buy now then it is best to start proceedings now. The market seems to be stable at the moment even though house prices are creeping up.
So in conclusion, if you are looking for a Buy-To-Let property then make sure you investigate landlord insurance, getting a proper tenancy agreement in place and talk to the Funding Hut team about getting the best deal on the mortgage market.