Summary
With buy to let mortgages increasing in popularity and availability, is this a good way for you to secure a future nest egg?
Some information on buy to let mortgages; are they right for you?
Author: Andrew Tuthill
- Home Mortgage Loans
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- The choice between variable and fixed rate mortgages is important. Yet the decision is difficult since it depends on the future direction of interest rates.
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- Mortgages. Big changes in the buying and selling of houses.
- In mid summer 2007 everyone who wants to sell a property will have to prepare a Home Information Packs before they put it on the market. This article explains what the Packs will have to include what they'll cost - and whether we expect them to work!
- Mortgaging for funds
- A new study has found that pensioners are concerned that they will have to sell their homes or take in lodgers to make ends meet.
So, what are the requirements of buying to let? Well, the main requirement of a buy to let mortgage is that the rent value of the property can cover costs of purchasing and maintaining the household. This can include mortgage payments, letting agency fees, building maintenance, building insurance, advertising, accountancy fees, management charges and any other associated costs. For example, licenses will be required for houses with more than 3 stories and more than 5 occupants. In fact, a general requirement is that rent covers 130% of the mortgage payments.
For example, a £100,000 mortgage will require potential rent of £520 per month. This is calculated from an £80,000 mortgage (after a £20,000 deposit payment) with an assumed rate of 6%. This example would command mortgage payments of £400 per month, so add your 30% to this and you come to the previously stated £520 rent. This appears to be a fair assessment when you consider the possible periods of time without tenants on top of all the previously mentioned house costs.
Fortunately for you, Council Tax is the responsibility of the tenants once they are occupying the house. However, you will be responsible for a percentage of the area rate if the house is unoccupied for more than 6 months. This will be a smaller percentage if the house is unfurnished.