Buy To Let

Buy to let

Is it elementary that you could buy a property for investment?

 

You cannot take out a standard residential loan on a property you are letting commercially. You will need a specific ‘buy to let mortgage’ if your intention is to borrow to buy a property for commercial gain.

 

Our Detectives Manual To Buy To Let

In many parts of Somerset, landlords are seeing an increasing demand for rental accommodation, particularly from those who are struggling to afford a deposit for their first home.

As savings accounts recently have shown a poor return it’s easily deduced that a buy-to-let property is an attractive investment option for many people. Renting a second property can also provide an additional source of income for retirement.

If you are considering buying a property to let, one of the most important considerations will be the mortgage itself. The mortgage will influence how much return you get, affect your tax liability and help to manage your risk.

The important factors you should consider are that firstly, the interest rate is normally higher than that of a standard mortgage.

Secondly, you will have to provide a bigger deposit on a buy-to-let property, a minimum of 25% is normal, however some of the best deals demand a deposit of 40% or more.

Thirdly, there is an affordability calculation. Lenders’ look at the expected rental income. The majority of lenders insist that the annual rental income must at least equal 125% of the annual mortgage interest payments.

The required rental income buffer on top of the mortgage interest due is also there to allow for a period of vacancy between tenants.

The strict conditions reflect the greater risk of buy-to-let loans, as the statistics show that borrowers are more likely to default on a buy-to-let than a residential mortgage.

You can usually choose between a range of mortgage deals, including fixed rate and tracker loans.

 

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

 

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