BUY TO LET MORTGAGE

Buy to let mortgages are now very popular as many individuals have decided that investment in residential property is likely to be a better long term proposition than the stock market, savings or pensions.

If you are already into property investment or just starting your property portfolio then our specialist brokers have access to a wide range of appropriate loans with some of the best mortgage rates available. Phone now and talk to a professional adviser at one of our brokers and get some unbiased and expert advice on the right mortgage for you. Their advice is totally impartial, without obligation and free.

What Is Buy To Let?

Buy to Let is a scheme, which has been designed to help private individuals invest in property for letting purposes without being penalised by mortgage surcharges or paying commercial rates of interest. Basically you can buy property specifically for rent by tenants.

The major difference is that mortgage lenders in the scheme will take account of rental income likely to be achieved from a property when considering an application for that property.

Previously, money from letting could not be considered as income when determining the ability of a borrower to make mortgage repayments. Also in the past anyone buying a property to let would have been charged a higher commercial interest rate. Now, if you apply for a buy to let mortgage or remortgage you will be able to include the potential rent as part of your income.

Buy to Let Return On Investment (ROI)

On average in the UK you can expect to get about a 7% to 10% rental return on your investment, but this can be less for larger more expensive properties.

However, this is before taking into account the day-to-day expenses that every landlord will need to budget for such as property maintenance, insurance, agent’s fees etc.

The good news is that the value of your property is likely to rise by 10% each year as well and there is currently no sign of this changing in the years to come. This is therefore a great long-term investment as it gives you an income as well as capital appreciation.

Is It Worth It?

If you have to take out a buy to let loan to purchase the property in the first place this will also have to be taken into account when calculating your actual income form the property.

So although the cash left in your pocket from your income may not be large, the gross rental income should cover all the expenses of running the property including the mortgage. In order to do this you will need to have a gross rent from your property that is 25% to 45% greater than your mortgage repayments.

The major benefit will probably be seen when you come to sell, as the price you get could be substantially higher than what you paid for the property when you bought it.

You need to decide what you are looking for. You may want an income or an appreciating asset or maybe even both. All three are attainable, but whether you get what you want will depend entirely on the property you choose, your skill in putting it into the right condition to let and your ability to let it. It won’t be easy, but don’t let that put you off.

What about Tax?

You can claim some of your expenses as deductions against tax and these include maintenance and repair costs, letting agent’s fees, insurance, gardening and cleaning.

Anything that can be considered as an improvement to your property is not allowed.

If you let your property furnished the initial purchase cost is not allowed, but you can claim a wear and tear allowance of 10% of the gross rent. The initial cost of furniture, fittings and fixtures is not allowable, but the actual cost of subsequent replacement may be claimed.

Any interest paid as part of your mortgage repayment is also allowed.

Your income after subtracting allowable deductions will be added to the other income on your UK tax return and you will be charged tax accordingly.

When you come to sell your rental property you will have to pay capital gains tax on any gain you have made, but this will vary depending on how long you have owned the property.