Buy to let – what you need to know

Over recent years the rising value of property across the UK has seen property become a huge investment opportunity, with many business minded people jumping on the buy to let bandwagon in order to secure an investment for the future and to benefit from an immediate income in some cases.

With property prices putting homeownership out of the reach of many first time buyers an increasing number of landlords have benefited from rising interest in their rental properties, as for many consumers renting is the only option because of lack of affordability when it comes to purchasing a property.

That said, recent reports have indicated that the buy to let market has become something that only wealthier consumers can now afford to get involved in, although this had not always been the case. According to reports the average deposit required on a buy to let mortgage just a few years ago was around 8%, which equated to an average deposit of about £8000.

However, some officials claim that over the past few years the amount required to get a buy to let property has rocketed by over 500%, with the average amount now required to take on a buy to let mortgage coming in at over £65,000, which equates to an average of around 30% of the property value.

Of course for those that can afford to raise the kind of deposit required in today’s economic climate buy to let can prove to be a sound investment, and can help to create a stream of income in the short term if you are making a profit from the amount that you are charging, and can of course prove to be a very lucrative long term investment, as once the mortgage has been paid off the property is yours and if you wish you can continue to rent it out and earn pure profit as there will be no mortgage repayments to deal with.

The first stage of getting into buy to let is securing a buy to let mortgage. Of course, as with any mortgage this is something that you need to give very careful consideration to and not rush into.

You need to consider whether this is something that you can afford to do, can keep on top of, and can afford to finance during periods when you may have nobody renting or paying an income on the property.

Also, take into consideration risks such as squatters, illegal occupiers, non-payers, etc. There are insurances to cover these sorts of situation, but getting a bad tenant can prove very stressful and you need to be able to cope with these stresses.

When you apply for a buy to let mortgage most lenders will take into account your expected rental income in addition to your regular income. Others may not take your regular income into account, and may base the mortgage offer on your expected rental income alone.

As with other types of mortgages a number of factors are taken into consideration when determining your eligibility to get the mortgage, how much you can borrow, and what sort of interest rate you will be charged. This includes factors such as your credit rating and history, your expected rental income, in some cases your regular income, etc.

It is important to remember that interest rates are generally higher on these mortgages than on standard mortgages, and the deposit requirements can be high, so you will need to raise some capital.

You should also make sure that you have capital available to fall back on in the event that you run into problems with getting rental income on your property, as if you are relying on the rental income to meet the buy to let mortgage repayments you could find yourself in hot water.

It is important that you compare a range of buy to let mortgages from a number of lenders before you make a decision, as the interest rates, eligibility requirements, deposit requirements, and other important areas can vary from one lender to another. It is therefore vital that you browse and compare different buy to let mortgages in order to find one that suits your needs and your pocket.

You should also take into account other costs involved with buy to let, such as marketing costs, the cost of repairs on the property, furniture if you plan to rent as a furnished property, buildings insurance, and any other types of insurance cover that you plan to take out. When added up this could affect affordability, as you will also have the mortgage repayment to deal with, so do make sure that you can comfortably meet all of these payments in order to reduce