Rent guarantee insurance
A tenant that falls into arrears can jeopardise your ability to meet your mortgage repayments. If you fall into arrears with your mortgage repayments you risk losing your property. Rent guarantee insurance covers you if tenants default on their rent and protects your ability to pay your mortgage. Some policies also cover any associated legal costs. Some Buy To Let Mortgages are not regulated by the Financial Conduct Authority.
Read moreRepayment mortgage
With a repayment mortgage your monthly repayments cover both capital and interest on the loan. As the term continues, the amount outstanding on the loan reduces so the full amount of the loan will have been repaid at the end of the term as long as you have maintained payments. No other repayment vehicle is needed and it avoids the risk of investing (e.g. in the stock market). If you remortgage, you may be tempted to extend the end repayment date in order to lower your monthly payments. However this means that the amount you repay overall increases over time.
Read moreRisks
As with all investments, the value of a property can go down as well as up. Past performance is not a guide for the future. If your mortgage loan exceeds the property value, you will have negative equity. Also factor in the costs of selling, such as using an estate agency, into your net value. However, if you pick the right area, and are realistic about returns, you can reduce the risks. Unforeseen structural problems could prove expensive, so budgeting for regular maintenance is crucial, as is having the right level of buildings insurance. Rental income from buy-to-let properties can […]
Read moreSelf-employed mortgages
There are over 4.9 million self-employed people (source: ONS; EMP14 August 2019*) in the UK and contrary to popular belief getting a mortgage and being self-employed are not mutually exclusive. Let us look at the requirements of a self employed mortgage. The key thing to consider is that lenders don’t just look at the numbers when approving a mortgage – there are are several other factors that influence this decision. Below are the things to consider when applying for a mortgage when you are self-employed. Speak with a broker: It’s worth mentioning this upfront as not all lenders have […]
Read moreTax implications
The UK government introduced significant changes to tax relief on buy-to-let mortgage interest in 2017, which have been fully phased in by 2020. Previously, landlords could deduct mortgage interest payments from their rental income to reduce their taxable income. However, this system has been replaced with a tax credit. Now, landlords receive tax relief at the basic rate of 20% on their mortgage interest, but they can no longer deduct mortgage interest directly from their rental income. These changes primarily impact higher-rate taxpayers, who once received relief at 40% but now only get 20% under the new system. For some […]
Read moreTenants
Not all lenders will allow students or DSS tenants, so consider carefully the type of occupant you wish to attract, as it may limit the number of lenders willing to lend to you. Some Buy To Let Mortgages are not regulated by the Financial Conduct Authority.
Read moreValuation and survey fees
Before a lender will grant you a mortgage it will insist on a valuation to prove the property is worth what you’re paying for it. The size of the valuation fee will vary by lender and property value but for a property costing £200,000 expect to pay around £355 (source: Halifax Building Society June 2015). The basic valuation is for the lender’s benefit so that it feels comfortable lending against the property. If your property is rented out, then a rental assessment will also be required. It may be possible to raise a larger mortgage with one lender compared to […]
Read moreWaiver of premium
This is a feature that can be added to some insurance plans. Should you become disabled, or seriously ill and unable to pay the premiums of a plan, this cover can pay your premiums for you. There is normally a period before this benefit starts where you need to continue paying premiums (a deferred period). Once the deferred period has passed, you will have your premiums paid for you.
Read more