Buy to Let

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Becoming a private landlord can be riskier and more complicated than many people think, and should not be viewed as an easy way of raising funds. It can also be very time consuming, more so than most forms of investment, with no guarantee that house prices will rise and increase the value of your property in the long term. That said, with the correct planning, owning a second property that you can to let to tenants can reap considerable financial rewards over time.

There are 3 main differences with a Buy to Let mortgage:

  • Rent Potential - the decision as to whether or not a mortgage will be offered is usually based on the rent you will earn, as well as your existing income. In some cases your income is never considered.

  • Interest Rate - buy to let mortgages have slightly higher interest rates.

  • A Larger Deposit - typically a minimum of 20% or 25% of the property's value is required as a deposit.

When buying a second property to let, you will need to decide whether your primary objective is income or capital growth. In other words, are you looking to make a profit month on month or are you looking to make a profit through increased equity as the value of your second property increases over time? The answer may affect the type of property you purchase, and the location.

Managing a property can bring many extra costs on top of the monthly mortgage repayments. As a guide, you should aim to achieve a gross rent of about 135% of the rental property's interest only mortgage repayments in order to cover your costs if anything goes wrong.

The Financial Conduct Authority does not regulate on Buy to Let Mortgages



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