Buying a property to let?
Here is a list of our frequently asked questions.
Why buy to let?
Buying a property to let is often used to provide a monthly income or as an alternative retirement strategy to stocks and shares. You can raise a mortgage on a property, let the property out and use the rental income to pay the mortgage. The value of the property could also increase over time. It isn’t without its risks though as property values can rise and fall. If the property is empty and there is a mortgage on the property it still has to be paid. Over recent years buy to let investment properties have received less favourable tax treatment.
What is a buy to let mortgage?
Buy to let mortgage lenders usually lend you up to 75% of the purchase price or value of a suitable property to let out. They will take into account the rent that could be charged and sometimes the landlord’s personal income. The rent is then used to pay for this mortgage each month. Generally, the lower the percentage of borrowing against the property the more favourable the interest rate. Buy to let mortgages are usually taken on an interest only basis. The property may need to be sold at the end of the term to repay the loan. Sometimes over-payments can be made each month or year to reduce the mortgage balance.
How much can I borrow on a buy to let mortgage?
Generally, up to 75% of the value of the property, subject to the rent covering the loan amount each month by around 200%.
How much deposit is needed for a buy to let mortgage?
The minimum deposit for a buy to let mortgage is 25%. The higher the deposit the better the interest rate you may be offered. Deposit amounts do depend on property type and rental income.
What’s the criteria for a buy to let mortgage?
This is a lender specific question as they vary so much. Generally, buy to let lenders are looking for the following:
- Good credit history.
- A reasonable personal income.
- Own a property already.
- Have some experience as a landlord.
- A deposit of 25% of more.
- The rent to cover the mortgage payment on interest only by around 200%.
If you don’t fit into this criteria, don’t worry, there are many different lenders who offer mortgages to different customer types.
Can you buy to let as a first time buyer?
Generally, the answer is no. But there are buy to let mortgage lenders that will consider a buy to let mortgage to a first time buyer.
When do I need a buy to let mortgage?
If you are buying a property to let out to someone that isn’t a family member. Buy to let mortgages are not suitable if you are going to live in the property. If you are going to let the property to a family member you may need a regulated buy to let mortgage.
Which property is best for buy to let?
If you are buying a property to let, you should consider resale value, location, rental demand and rental yield.
When considering location, look for a property close to local amenities, good schools and transport links. Typically, a small 2 or 3 bedroom house close to a station provides the sweet spot for all these criteria.
How does a let to buy mortgage work?
A let to buy mortgage is a term used when you are looking to let out your existing property that you live in and buy a new property to live in. The process is to remortgage your current residential home and change that mortgage to a buy to let mortgage. Now you have a buy to let mortgage on your home you need to find a new residential home to move in to and require a mortgage lender that will allow a let to buy criteria for the new residential mortgage. Once you complete on your new home you can let out your old home. This will become your buy to let.
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Can I release equity to buy another property?
The simply answer is yes. We can raise money on an existing residential home or another buy to let. You could raise the whole amount or just enough for a deposit.
What makes a good tenant?
When considering a tenant, I like to think to myself would I lend money to this person. If the answer is no, then they are not the right candidate for the property. Things you should consider are:
- Credit history.
- Address history.
- Work history.
- Income & Expenditure.
- What have they got to lose.
- Have they got pets
Remember no good deed goes unpunished and tenants with hard luck stories tend not to work out very well.
Should I use a letting agent?
If you are letting a property out for the first time, then yes. Once you understand the process, legal implications and are able to stay up to date with changes in legislation then you could consider managing the property yourself. Generally using a letting agent is safer and less hassle.
What is a HMO?
A House of Multiple Occupancy or HMO are generally properties that provide low cost, short term rental accommodation for students or single tenants that require just a bedroom. Living, kitchen and bathrooms are usually shared. You can raise a mortgage on a HMO but you do need a licence and the property requires some extra safety features over a standard buy to let property. Generally, HMO’s provide a greater monthly income over a standard buy to let property, but wear and tear and tenant turn over can be greater. HMO’s are considered to be higher risk and require more attention than a standard buy to let.
Want to know more? contact us now we would love to hear from you.