Buy to Let Mortgages
If you are considering buying a second property to rent out then you will need to consider your reasons for doing this; is it that you are buying the property to make profits on the rent month after month? Or is that you want to cash in on the long term capital gains? Either way this should affect what kind of property you choose and in which location.
Renting out a second property can be a valuable source of income and have multiple financial gains but you first have to consider the additional costs involved. If you are assuming that owning a second property is just a way to make easy money then you may have over-looked the other expenses and responsibilities that being a landlord entails.
Depending on what basis you obtained the property and on what grounds you intend to rent it, there can be numerous additional costs that you may have overlooked in your consideration to become a landlord such as: agent's fees, maintenance costs, ground rent, decoration and furnishings, appliances, insurance and legal costs all need to be considered. As well as the financial factors, being a landlord can be time consuming, resulting in buying to let being a lot more of a high maintenance form of investment than others.
The defining differences between Buy to Let Mortgages and regular mortgages are that interest rates are higher, the life of the mortgage is usually longer, and the initial deposit is higher: usually 20 to 20% of the value of the property. Another distinguishing characteristic of a Buy to Let Mortgage is that rather than using income assessment, lenders will often asses the rent potential as a deciding factor in your mortgage application, in addition to this they may or may not choose to take your personal income into account.
So when you are taking out a mortgage on a property that you intend to rent the rate at which you get your mortgage and the size of the repayments will affect the amount of deposit and rent you will be charging to your tenants. It is advisable that you charge gross rent of at least 135% of the mortgages interest only repayments to ensure you can cover any extra costs.
The types of Buy to Let mortgage available are pretty much the same as normal mortgages; Trackers, Fixed Rate, Interest Only, and Variable Rate Mortgages etc are all available but with the modified rates, requirements and terms that come hand in hand with Buy to Let Mortgages.©MoneyHighStreet.com