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Mortgage system is a step in the right direction


By Prev Info - October 18, 2022

 The property market - although subject to fluctuation, like any other - currently represents a secure and stable investment, enabling short-term gains, from rental income, and, potentially, long-term gains from the capital appreciation of the property, itself, to be achieved.



Mortgage Type


The purchase of a buy-to-let property, if a mortgage loan is required, typically involves the payment of a larger deposit than for a standard residential property - certain lenders may allow you to borrow up to 90% of the total property value, but between 75% and 85% is more common, leaving you to find between 15% and 25% as a deposit.

Interests rates, too, are higher, although not hugely so - at the time of writing, a typical major lender is offering a fixed rate of 5.29%, for two years, on an interest-only, or repayment mortgage.

The other important difference between a buy-to-let mortgage and an ordinary mortgage is that lenders will make an assessment of the potential of the property, in terms of rental income, and include this in their calculations - which should, if you hadn't considered it already, alert you to the fact that your choice of property, and its location, is all important.

Buy-to-let mortgages are available in most of the same forms and packages as residential mortgages generally - interest-only, repayment (that is, capital and interest), at fixed, capped, discounted, or “tracker" rates - and the type that you choose depends largely on how much you can afford, in terms of repayments, and your personal preference.

 An interest-only mortgage, for example, offers cheaper monthly instalments, but does not pay off any of the original capital sum, while, with a repayment mortgage, you are safe in the knowledge that the entire debt will be repaid at the end of the term, but you cannot offset the cost of repayment against your profits for tax purposes, and are at no great advantage. The best type of mortgage for you is, perhaps, best discussed with an Independent Financial Advisor.

Conclusion


A buy-to-let property needs to be chosen, and, indeed, managed, from an objective and commercial viewpoint. So, don't rush out and buy a charming, yet ancient, olde worlde property, with an enormous garden, out “in the sticks", just because you might like to live there - the chances are that it will have limited rental appeal, to start with, and cost you a fortune in maintenance and repairs. 

A member of “The Association of Residential Letting Agents" (ARLA) should be able to assist you in finding the right type of property, in the right location, and, for a fee, will also manage the property for you, and organise, and vet, potential tenants. If you want to “go it alone", ARLA publishes a booklet full of advice for prospective landlords, and also has a website





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