How Buy to Let Mortgages Work
Property is often seen as a very sound investment - and bricks and mortar are often seen as far safer than cash in some circumstances.
One way of investing in property - the system whereby a potential landlord buys a house with a view to then renting it out - has become more and more popular in the United Kingdom, leading to an increase in buy to let mortgages.
Landlords now have a considerable degree of control over their properties thanks to legislation.
In addition, there are buy to let mortgages available, often with tempting rates of interest, which has led to an swell in the attraction of purchasing houses to rent.
The system of obtaining one of these mortgages differs from a standard home loan in that the landlord must normally prove potential income in excess of the mortgage payments to show that the rent they expect to get from the property will cover their monthly charge.
This is often between 120 per cent and 150 per cent of the monthly payment, but as landlords can often earn more than this in rent, it can often be a worthwhile investment.
The reason for this leeway is because the mortgage lender needs to make sure that the finance is there to cover unforeseen costs like maintenance work on the house, insurances, or to cover spells in the property's future when there might not be tenants in residence, but the mortgage will still need to be paid.
Instead of the 120-150 per cent rule, some lenders will offer a mortgage of a three times your salary plus half the expected rental income.
However, anyone who is considering taking up a buy to let mortgage should carefully think about everything involved with this decision before committing.
Purchasing a house to rent and purchasing a house to live in are two very different things.
The former is in fact the equivalent of taking on a business enterprise, as you will have to run the house or bring in a rental agency to run it for you.
If you run the property yourself, your duties will include: seeking out new tenants and verifying their references and credit checks; collecting the rent from said tenants; keeping the property well-maintained and sorting out any issues your tenants might have.
In addition, you will also need to know your duties in terms of carrying out repairs; checking the safety of gas and electrical appliances regularly; and making sure that fire safety requirements are met for any furniture and furnishings.
The other way to do it is to get a letting agency to run the property for you.
On the downside, this is likely to cost you between 10 and 15 per cent of the rent you collect (although cheaper deals are available), but in return for that fee, they will take responsibility for all of the duties detailed above, leaving you to simply collect the rent.
A financial advisor will be able to help you out in all the ins and outs of buy to let mortgages, advise you on the best options and arrange finance for you to buy your property.
One way of investing in property - the system whereby a potential landlord buys a house with a view to then renting it out - has become more and more popular in the United Kingdom, leading to an increase in buy to let mortgages.
Landlords now have a considerable degree of control over their properties thanks to legislation.
In addition, there are buy to let mortgages available, often with tempting rates of interest, which has led to an swell in the attraction of purchasing houses to rent.
The system of obtaining one of these mortgages differs from a standard home loan in that the landlord must normally prove potential income in excess of the mortgage payments to show that the rent they expect to get from the property will cover their monthly charge.
This is often between 120 per cent and 150 per cent of the monthly payment, but as landlords can often earn more than this in rent, it can often be a worthwhile investment.
The reason for this leeway is because the mortgage lender needs to make sure that the finance is there to cover unforeseen costs like maintenance work on the house, insurances, or to cover spells in the property's future when there might not be tenants in residence, but the mortgage will still need to be paid.
Instead of the 120-150 per cent rule, some lenders will offer a mortgage of a three times your salary plus half the expected rental income.
However, anyone who is considering taking up a buy to let mortgage should carefully think about everything involved with this decision before committing.
Purchasing a house to rent and purchasing a house to live in are two very different things.
The former is in fact the equivalent of taking on a business enterprise, as you will have to run the house or bring in a rental agency to run it for you.
If you run the property yourself, your duties will include: seeking out new tenants and verifying their references and credit checks; collecting the rent from said tenants; keeping the property well-maintained and sorting out any issues your tenants might have.
In addition, you will also need to know your duties in terms of carrying out repairs; checking the safety of gas and electrical appliances regularly; and making sure that fire safety requirements are met for any furniture and furnishings.
The other way to do it is to get a letting agency to run the property for you.
On the downside, this is likely to cost you between 10 and 15 per cent of the rent you collect (although cheaper deals are available), but in return for that fee, they will take responsibility for all of the duties detailed above, leaving you to simply collect the rent.
A financial advisor will be able to help you out in all the ins and outs of buy to let mortgages, advise you on the best options and arrange finance for you to buy your property.
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