I’m thinking about ‘buy-to-let’?
A buy-to-let mortgage is one specifically designed for buying or refinancing a residential property that is to be rented to tenants rather than be lived in by the borrower.
For those with more faith in bricks and mortar than stocks and shares, ‘buy-to-let’ has become a popular way of investing in the property market. Benefits can include a stable rental income along with an accumulation of wealth as the value of housing rises. But, although investing in a buy-to-let property may look attractive in times of low interest rates and stock market volatility, like any investment, there are never any guarantees.
Buy-to-let mortgages are calculated in a different way to residential mortgages. Instead of using the borrower’s income to determine the size of the loan, the mortgage provider uses a ‘rent-to-interest’ (RTI) calculation which means the borrower has to prove the rental income will cover the interest on the mortgage. RTI figures vary between mortgage providers and first-time landlords may be expected to have a separate annual income.
Buy-to-let mortgages are classed as a business transaction so interest rates and fees are usually higher than those charged for a residential, borrower-occupier mortgage. However, there are tax advantages as, although rental income is considered in the same way as salary, landlords can set their costs – including the interest component of their mortgage – against the taxable portion of their rental income.
The decision as to whether to go for an interest-only or a repayment mortgage will depend on your overall investment strategy. Interest-only mortgages are usually more popular with professional landlords and property investors; repayment mortgages suit investors wanting to use property as an alternative to a pension plan or build up a small property portfolio.
Having reliable tenants is vital. If you can’t keep the property occupied or the tenants can’t pay the rent, or they cause you high maintenance costs, you may not be able to afford the mortgage repayments – and if that happens, the property could be repossessed.
Some buy-to-let mortgages are not available on the high street and can only be accessed via specialist intermediaries so it’s vital to make sure you use a truly independent, specialist adviser to receive unbiased advice from across the whole of the market.
How can One Financial Solutions help you?
One Financial Solutions is here to help you no matter whether you’re a first-time buyer, thinking about ‘buy-to-let’ as an investment opportunity or wanting to know the pros and cons of equity release.
Buying a property is probably the greatest financial undertaking most of us will ever make; it’s a huge commitment and one that needs to be thoroughly considered, ideally with the help of an expert guide. As a truly independent firm of financial advisers we’ll make sure the mortgage we recommend to you is selected from the entire market and is the one that is best for you.
So, if you’re looking for a mortgage or just want advice on an associated subject, please call us on 020 3714 9565 or ask us to call you by sending an email to firstname.lastname@example.org.