Mortgages

Becoming a private landlord should not be seen as an easy way of making money. It can be riskier and more complicated. It can also be very time consuming, more than most forms of investment, and there is no guarantee that house prices will rise. That said, having a second property to let to tenants could reap considerable financial rewards over time.

There are 3 main differences in buy to let mortgages:

• 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 income. In some cases your income is not ever considered.
• Interest Rate – buy to let mortgages have slightly higher interest rates.
• 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 from the second property if it increases in value over time? The decision may affect the type of property you purchase, and the location.

When you manage a property there are many costs involved in addition to the monthly mortgage repayments. As a guide, you should be aiming to achieve a gross rent between 125%  to 145% of the rental property’s interest only mortgage repayments in order to cover your costs should anything go wrong.

These additional costs include:

• Property upkeep – maintenance costs for the property.
• Letting agent’s fees – letting agents charge around 10% of the monthly rent for finding and vetting tenants with an additional cost of around 5% if you require a full management service.
• Ground rent / service charges – applicable to leasehold properties.
• Legal insurance – to cover costs from evicting tenants in the event of non-payment, very important, as this can be very expensive.
• Insurance – building insurance and contents insurance for the items provided as part of the rental agreement.
• Furnishings – the purchase of any furniture. If the property is to be let furnished, make sure you are covered for this by your home insurance.
• Gas / electrical appliances – cost of maintaining appliances and ensuring they comply with any regulations such as safety tests.
• Decorating costs – the property may require work ranging from painting, to a new bathroom suite before it is suitable for letting to tenants.

When choosing a property to let, it is wise to take advice from local letting agents to determine; what types of properties are in need and which parts of the town are best or most wanted. They can tell you if there is a University in the town, and if students are looking for somewhere to live.

Your home may be repossessed if you do not keep up repayments on your mortgage(s).
The FCA does not regulate some forms of buy to

You don’t have to be a builder to get a self-build mortgage!  If you have found, or are looking for, a plot of land upon which you want to build a property then all you need to do is call us for guidance. We can even refer you to an NHBC / Zurich Municipal registered building firm who can help you through the entire process and construct a house to your specification. The main difference between a self-build mortgage and a house purchase mortgage is that with a self-build mortgage, money is released in stages as the build progresses rather than as a single amount.

The stages can be fixed or flexible but there are usually five and these depend on the type of building work. We can explain these in detail with you once you are ready to proceed, and will work hand in hand with your builders to make sure that the stage payments fit with their schedule. If you want to stay in your current home while the new one is built, you need to ensure that you have enough income to cover both mortgages.