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Buy To Let

Buy-to-let investment advice from Resolute Mortgages

*As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.
*A buy to let mortgage will be secured against your property. Some types of buy to let mortgages are not regulated by the Financial Conduct Authority.

Resolute are here to give you the advice you need to make smart decisions when it comes to buy-to-let investments. Our expert advisors are on hand, ready to speak to landlords of all levels.   

Whether you’re a seasoned landlord or looking to get into the rental game for the first time, this mortgage option gives you an opportunity to invest in property.

Buying a property to rent out can seem like a great way to make easy money and allow you security in your financial future but its not without its risks involved.  Mortgage providers see buy-to-let mortgages as higher risk than residential mortgages and this is because landlords often face problems with rent collection, eviction and it is unlikely that your property will constantly be occupied.

Buy To Let - Resolute Mortgages - Claydon, Ipswich
The setup of the Buy to Let mortgage is very similar to a standard residential mortgage in that, you have the option of capital & repayment or interest-only and there are a range of fixed and variable products available depending on your circumstances and the property purchased.  You will find there are product fees attached to most lender deals, but any fees and costs are detailed in your illustration.
Typically, a Buy to Let mortgage is arranged on an interest only basis.  This means that when you are making your monthly payments, you are only paying the interest back and not the capital therefore, the mortgage loan amount remains the same throughout the mortgage term.   Lenders accept the ‘sale of the asset’ to be a suitable repayment vehicle in most cases but this is subject to the lender’s discretion at the time of application.

First Time Landlords

Fancy life as a landlord, or have a property you don’t want to sell yet and need to rent out? Then you will need a Buy to Let mortgage.

Investing in a buy to let property is an exciting way to generate extra income and build your portfolio. However, the process isn’t as straightforward as it used to be due to recent changes, but don’t panic!  Our team of advisors are on hand to guide you through the process.

When investing in property, it is essential to base your decisions on the investment potential rather than letting emotions lead you astray. It’s important that investors approach this decision with their financial eyes wide open and a true understanding of the potential implications.

There are many considerations that need to be taken into account when making your decisions and I have detailed below a few.  Lenders see Buy to Let investment as higher risk, therefore, lending criteria has tightened up over the years.

Most lenders require the rent to exceed the monthly mortgage payments but either 125% or 145%.  There are specific calculator lenders use to work out whether your rental income, monthly mortgage payment and the property value will fit on affordability and meet their criteria.

Is the property to boost your income, or for longer-term growth or both?   There will be tax aspects you need to consider and full advice on this area can be given by a professional tax advise specialist.   Also be mindful that when you come to sell the property, you may also be liable for capital gains tax, should any gains be made on the property.

The location of your property.  Speaking to local estate agents in the area you are wanting to purchase, is a good starting point to gain knowledge on the local area and potential expected rental income.

The property types.  Some lenders will have different criteria around flats and house purchases such as minimum deposit size.  This can be discussed further once you have an idea of what type of property you would like to purchase.

Property Use.  Lenders prefer someone who is planning to offer Single Assured Short-Term Tenancies (AST).  House of Multi occupancy (HMO) or Holiday / Short Term Lets may require a more specialist lender.

Most lenders will accept a minimum deposit of 25% of the purchase price.  There are a few specialist lenders, who will accept 20% or even 15%.  The larger deposit you put down, the better the mortgage products you could be entitled to, as you wont be borrowing as much from the lender.

Most lenders will accept ‘Sale of property’ as a form of repayment vehicle however, you can use savings or other investments as another form.

Anytime you purchase land or property in UK, you could be subject to Stamp duty tax depending on your threshold.   Whether this is your first investment property or you have a portfolio, the stamp duty liability will be due.  If there are other properties in the background such as an existing residential then usually an extra 3% charge is added on top of the current stamp duty rates.

There are some additional costs involved in preparing your property to be ready to rent that not all new landlords are aware of.

  1. Energy Performance Certificate referred to as an EPC.   An EPC shows tenants how energy efficient the property is.  This may also be required by your lender, as the EPC has to be a minimum requirement of E or above.   While this is generally a lower cost, it is something that is required before an viewings can take place on the property.
  2. Electrical Safety Inspection Report.  Since July 2020 landlords are obliged to get an electrical safety report to make sure that all national standards for electrical safety are met.  This must be reviewed every 5 years and a copy of the report must be given to the tenants.
  3. Gas Safety Certificate or CP12.  A gas safety check is another legal requirement and must be completed annually.  This involved a gas safe registered engineer checking all gas appliances and fittings.
  4. Smoke / Carbon Monoxide Alarms. All landlords are required to fit smoke and carbon monoxide alarms.
  5. Letting Agent Fees.  If you decide you want to use a letting agent its well worth researching the costs involved, especially if your investment property isn’t local to you.  Depending on your level of management, this cost can soon escalate.
  6. Landlord Licence.  Certain Boroughs requires landlords to register and obtain a landlord licence before you can let out your property.  This requirement and cost may vary per borough.
  7. Landlord Insurance.  Much like normal building insurance you will need to make sure you have an appropriate level of cover. At a minimum, you’ll need building insurance to get your mortgage, but landlord insurance can also cover emergency call outs as well as legal expenses.
  8. Maintenance, Repairs & Redecorating.   The biggest and least predictable costs are any maintenance and repair jobs.

Before committing to a property investment, it’s worth conducting your own research and going beyond the obvious expenses and uncover the hidden costs that come with being a landlord.

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