Mortgages – Buy To Let A Wise Bet

Buy-to-let is often seen by private investors as an interesting alternative way to make their money grow. Certainly it offers the chance of double benefits for the owner. There is the income from letting the property and the hopeful increase in the value of the property.

Unlike the mortgage which you raise when you buy your home, which is based upon your earnings, a buy-to-let mortgage is normally based on the income which can be generated from the letting of the property. There are many specialists in buy-to-let mortgages and a good broker will be aware of the prerequisites and terms which apply to them and will guide you to the right lender for your own circumstances.

The right property in the correct location is all-important. If your main aim is for growth in the value of the property then obviously you need to look at where you think the next “value-spurt” is going to be. Something like the Commonwealth games in London will pull up an area with all the developments and if you can get in early on this type of area there should be strong potential for property value growth. If income is your main aim, then University towns and cities are good hunting-grounds and you’re assured of a regular, although changing, stream of tenants, over the years.

Lenders like to see where their repayments are coming from and should be happy if you could produce some projected figures showing a gross income of around 135% of the property’s mortgage costs. This should cover the costs if things don’t go quite as smoothly as planned.

Costs over and above the mortgage repayments will include the upkeep of the property, any renovation work, furnishings if these are included in the contract and the cost of testing (for safety regulations) appliances and maintaining them. If the property is leasehold there could be ground rent and then there are possible service charges. Add to this any letting agent’s fees, typically 10% of the monthly rent and another 5% if you go for a management service. Don’t forget buildings insurance.

As far as a letting agent is concerned, they will earn their fees by searching for and vetting suitable tenants and collecting the rental. This could be valuable if you’re not renting in your own area, but is something many small landlords manage for themselves. Remember to allow for the time when there is no income from the property, between lettings, for example. At one time students use to pay rental on a per term basis, but nowadays it’s become more usual to pay for an annual occupancy.

Whilst everything goes well for the vast majority of private landlords, things can go wrong and it’s possible to find the whole project is more time consuming than you first thought. House prices have doubled in the past ten years or so, who knows how long this will continue?

In the event of bumps in the market, a landlord would still have the income from letting to cushion the blow and the property would still be there as a long term investment.

For all the advice and information that you need, the best approach is to find an on-line mortgage broker. They have access to all the latest mortgages from a range of lenders. As soon as they have your information they’ll scour the market for the best possible deal, on the most favourable terms.

Buy-to-let – think about it

Over the past few months, there’s been a general easing of the rules which apply to buy-to-let mortgages. Not everyone is completely happy with this and some feel it’s slightly risky for the first-time, inexperienced purchaser. It very much depends whether the rental property has to be strictly self-financing or whether the capital gain side of the deal is the main factor.

In the past it was usual for lenders to ask for a minimum 15% deposit and for income from letting to be 120% of the monthly mortgage payment. Nowadays, there are lenders who are willing to accept a 10% deposit and they are asking for projected income to cover the mortgage repayment.

Lenders offering mortgages on the 100% repayment basis include BM Solutions, Alliance and Leicester, Edeus and Northern Rock.

The 120%, and in some cases 130%, income target left a reasonable margin for times when things were not going so well. Unless a landlord is very lucky with their tenants, there are going to be times when there are gaps between lettings, or unexpected repairs to carry out, not to mention the possibility of falling property prices. In the case of buy-to-let, mortgages are granted on projected income from the property, rather than the buyer’s earnings. For a one-off landlord, venturing into this market for the first time, it’s possible that if they over-stretch their target, they could end up having to finance the project from their own earnings. They should go into this with their eyes open and be fully aware of this possibility.

For those who have been in buy-to-let for some time, things are different. It’s likely that they have built up equity in the property or have other rentals coming in and that these could come “into the pot” in the case of any short-term problems. In addition to this, they’ll have gained some valuable experience in handling their property and some may be in the position to arrange remortgages on existing properties to raise deposits for new ones.

Whilst this second group of investors can handle the generous mortgages, it’s probably as well to advise caution to those just starting out in buy-to-let and for them to consider the advantages of a “safety-net” plan.

With the rising price of property, it may be that a buyer will choose to invest purely in the growth of value in the property and not worry too much whether or not the income totally matches the outgoings. Personal circumstances should be taken into account and it depends on the “back up” available, but if property prices drop, then it may be a matter of riding out the storm and under-funding from the rental income may become a problem in time. Again, that cushion is invaluable.

Lenders are quite happy to fund buy-to-let purchases. The reason for this relaxation in their requirements is that although property prices have risen very nicely in the past few years, rents have not quite kept up. However, the property has obviously proved to be an excellent investment and these investors tend to be reliable. Mortgage arrears are very much less of a problem than with residential mortgages.

With so many lenders offering buy-to-let mortgages, you need to find an on-line broker to do your homework for you. Once you have a clear idea of the type of property you’re interested in and have considered location and likely letting income, they’ll find the ideal mortgage to suit your requirements and limitations. They can search a wide range of companies and come up with the very best deals.

Have a look at Michael Challiners fantastic articles about mortgages, life insurance and financial matters. Cheap Insurance articles – Loans articles – Mortgage articles

Buy to let mortgage: Steady source of income

Bye to Let Mortgage is a secured mortgage that is taken to buy a property and let out to a third party on rent. In the recent years, investing in a buy to let mortgage has become very popular in the UK. People are now using property to make money rather than putting their money in the bank. The main criterion while deciding on buy to let mortgage is that how much you are willing to pay and for how long.

If you are planning to get into buy to let mortgage, there are certain points that you need to consider:

  • There is something you need to consider when you are renting out your properties. There will be mortgage and insurance attached with your property. Therefore, you will have to consider as how much time you need to take to mange all these.
  • The area where you want to buy the property must be known to you. The area should be nearer to your home town and transport accessibility should be good.
  • Whom do you want to rent? This will depend upon the area and the target population. So, you should consider it while getting into buy to let mortgage.
  • Most of the buy to let mortgage require deposit money therefore, you will have to calculate your budget.

Buy to let mortgage is s good choice for investors when you are looking for a steady source of income. Though, it requires a big investment but, the return is quite obvious. You can manage the mortgage repayment as you get longer repayment period.