BUY TO LET MORTGAGES

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Times are changing and an awful lot of people are losing confidence in pension funds. Also an explosion of TV property programs has seen this market mushroom in the last 3 years. Mind you beware the programs last 30 minutes to an hour, in reality you could be letting yourself in for months of stress.

If you are determined to get on the buy to let ladder or increase your existing portfolio then we can help.

Most people arranging a buy to let will need to take out a specialist mortgage. You will also need to put down a sizable deposit - most lenders in this market will require at least 15% as a down payment, although many lenders may ask for up to 25%.

The good news is there is now more choice in the buy-to-let mortgage market. Previously, landlords were forced to take out commercial mortgages that were more expensive, but nowadays almost every high street lender offers a buy-to-let mortgage of sorts. If you have substantial equity in your own home, you may be able to look at re-mortgaging this and so obtain the funds to take out a small buy-to-let mortgage.

Because of the higher risks involved with letting out a property, buy-to-let mortgages are generally more expensive, although this can vary. While you can expect to pay more than for your own residence, there are some competitive fixed and discounted buy-to-let offers around. Our mortgage brokers will be able to point you in the right direction.

Lenders take different approaches. Some will base the mortgage on your income in addition to the amount of rent they estimate can be obtained. Others will base the loan purely on the rental. The formula they use will also vary. Typically a lender will require the rent to be at least 125% of the mortgage payment. Others will offer a three times' salary multiple and half the rental income.

Again, because of the tax implications, obtaining advice is necessary for those who are new to the market. Any interest you pay on a mortgage can be offset against tax, but capital payments cannot. This means it can make sense to have an interest-only mortgage, even though these are often not viewed as favourably as repayment loans by the lenders.

But if you want the property primarily for capital growth and want the loan repaid by a certain time - when you retire, for example - then a repayment mortgage may be more appropriate. A lot of people take the risk of having Interest only mortgages without a repayment vehicle in place to keep down the monthly costs. This is decision you should think carefully about or take advice on.

If your first investment is a success, then you may want to become a property mogul. Some lenders will provide up to 10 or more mortgages if they are confident the properties are well managed and the returns are good. Please be aware though if the market drops considerably and you have no tenant it could be a disaster.

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