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
3 main differences inbuy 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
Larger Deposit - typically a minimum of 20% or 25% of the property's value is required as a deposit
Interest Rate - buy to let mortgages have slightly higher interest rates
Most Buy-to-Let mortgages are not regulated by the Financial Conduct Authority
Your home may be repossessed if you do not keep up repayments on your mortgage
Additonal Costs
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 of about 145% of the rental property's interest only mortgage repayments in order to cover your costs should anything go wrong. These additional costs can include:
Property upkeep - maintenance costs for the property
Insurance - building insurance and contents insurance for the items provided as part of the rental agreement
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
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
Ground rent / service charges - applicable to leasehold properties
Gas / electrical appliances - cost of maintaining appliances and ensuring they comply with any regulations such as safety tests
Legal insurance - to cover costs from evicting tenants in the event of non-payment, very important, as this can be very expensive
Decorating costs - the property may require work ranging from painting, to a new bathroom suite before it is suitable for letting to tenants
Your property may be repossessed if you do not keep up repayments on your mortgage(s)
The Financial Conduct Authority does not regulate some forms of buy to let
Mortgaage Calculator
This calculator is for illustrative purposes only and may not reflect the true cost of repaying a mortgage before you enter into any new mortgage commitment, you need to be sure that it is affordable on your own personal budget. Use this budget planner to work out what you can afford to pay each month
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You voluntarily choose to provide personal details to us via this website. Personal information will be treated as confidential by us and held in accordance with GDPR May 2018 requirements. You agree that such personal information may be used to provide you with details of services and products in writing, by email or by telephone.
By submitting this information you have given your agreement to receive verbal contact from us to discuss your mortgage requirements.
The Mortgage Corner (Cheshire) Ltd is an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading style of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority (FCA 192642). Registered Office: 20 High Street, Congleton, Cheshire, CW12 1BD. Registered in England and Wales, Registration No 4912909
