Property Investment: Understanding Buy-To-Let Mortgages

understanding the buy-to-let mortgages

Most of us have dreamt of getting the keys to our first home at some stage in our lives, the chance to have a place to call your own.

But what if you can have two – or more – properties, and all the time someone else is paying?

Halifax Mortgages, for example, are among the many lenders who could help open the doors to becoming a buy-to-let landlord.

In principal, buy-to-let mortgages are a fantastic way to help you build for a brighter future, whether it is creating a retirement nest egg or paying for a property to pass on to your children.

And if your tenants are covering the tab then everyone could be a winner. Buy-to-let mortgages could be available to you if you want to invest in property and:

  • have a good credit record and aren’t being financially stretched
  • earn more than £25,000 per year
  • will be aged 70 or under by the time the mortgage is paid off.

If you tick those boxes then congratulations, things just became a lot easier.

Understanding the Challenges of Buy-To-Let

But that doesn’t mean becoming a landlord isn’t without its pitfalls, and that’s why it is vitally important you do your research first.

If you want to buy a second property then fees, interest rates and minimum deposits tend to be higher, meaning you may need to have more saved up than you would normally expect when purchasing bricks and mortar.

This is also particularly important when considering that you may not always have tenants in your property.

If you need to do the place up before putting up the ‘To Let’ sign then you could be looking at a few months without any income from the building – but plenty of outgoings as the work goes on.

There may also be occasions where your tenants move on and it takes a few weeks or months to find someone else willing to move in.

The worst-case scenario could include the people living in your property being unable to stump up the cash.

You are also responsible for the upkeep of your property, such as the structure and exterior, fittings and fixtures including bannisters, chimneys, wiring, sinks, baths, toilets and boilers – all of which could mean further outlays on your behalf.

Understanding the Housing Market

It is also important not to presume house prices will continue to rise rapidly and that selling the property will be the best way to repay the mortgage and cash in for a quick buck (especially if your have taken out an interest only mortgage).

If house prices slump then you may be forced to pay the difference, while any income you receive from rent is also taxable.

A three per cent stamp duty surcharge on buy-to-let and second home properties was also introduced in April 2017, adding an additional cost which need to be planned for.

But being a landlord isn’t all doom and gloom and if you do your homework and get the right mortgage and property then there is no reason why you cannot enjoy a brighter future.

Indeed, rising house prices have left many people unable to purchase a home of their own, with the number of middle-aged renters doubling in a decade. People will always be looking for a place to live, so if you can offer them a place they are happy to call home then there should be no reason why you cannot succeed as a landlord.

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