Buy-to-Let Mortgages

A buy-to-let mortgage is primarily designed for borrowers who want to buy a property with the sole intention of letting it out to a tenant. Becoming a private landlord should not be seen as an easy way of making easy money. It can be riskier and more complicated. It can also be very time consuming more than most forms of investments and there is no guarantee that house prices will rise.

As can be seen recently house prices are not immune to the falls in property valuations and although there is no guarantee that the property will increase in value over the longer term house prices have tended to increase in value.

Research must be conducted on Buy-To-Let properties. Over the years with the increased media coverage and dedicated TV programmes a high number of inexperienced investors have taken the plunge into the Buy to let market only to find that they have not considered the full implications of the buy to let market.

Over saturation of the market in certain areas had increased the number of properties available for rent thus increasing competition that subsequently reduced the rental income yield. With many properties left with no tenants and the reduced property values many private landlords are left with the upkeep and maintenance of the property and mortgage payments.

Having considered all the risks associated with a buy to let investment having a second property to let to tenants could reap considerable financial rewards over time. Firstly it can provide an income stream and secondly many Buy to Let landlords purchase property because of the potential for long-term accumulation of capital growth.

When choosing a property to let it is wise to take advice from local letting agents to determine; what type of properties are in need and in which parts of the town is best or most wanted. They can tell you if there is a University in the town and if students are looking for somewhere to live. The Association of Residential Letting Agents ARLA state that a property needs to be in the right area close to transport and other facilities and in good condition.

There are a number of tax issues that need to be looked at in order to maximise your tax position such as being able to offset your maintenance costs letting agent fees etc as well as any interest paid on a buy to let mortgage against your tax.

You can visit the ARLA website at www.arla.co.uk for further information on becoming a private landlord.

The criteria for a buy to let property is generally based on the expected rental income rather than a personal income which is used against residential homes or mortgages. Whilst interest rates may be slightly higher for a buy to let mortgage. Lending is generally based on around 130 of the expected rental income and as a general rule lenders still expect a deposit of around 15 to 20 although those with higher deposits can expect to receive a cheaper interest rate.

When you manage a property there are many costs involved in addition to the monthly mortgage repayments. These additional costs include:

  • Property upkeep - maintenance costs for the property.

  • Letting agent's fees - letting agents charge around 10 of the monthly rent for finding and vetting tenants with an additional cost of around 5 if you require a full management service.

  • Ground rent / service charges - applicable to leasehold properties.

  • Legal insurance - to cover costs from evicting tenants in the event of non-payment very important as this can be very expensive.

  • Insurance - building insurance and contents insurance for the items provided as part of the rental agreement.

  • Furnishings - the purchase of any furniture. If the property is to be let furnished make sure you are covered for this by your home insurance.

  • Gas / electrical appliances - cost of maintaining appliances and ensuring they comply with any regulations such as safety tests.

  • Decorating costs - the property may require work ranging from painting to a new bathroom suite before it is suitable for letting to tenants.


      • To speak to an Independent Mortgage Adviser about Buy-To-Let Mortgages simply complete the form on the right.

      Your property maybe repossessed if you do not keep up repayments on a mortgage. Please note that most buy to let mortgages are not regulated by the FSA