Buy to Let Mortgages

Buying a Property to Rent Out using a buy-to-let-mortgage

Soaring house prices, increased demand for rental property and better legal protection for private landlords have made buying a property to rent out to tenants an increasingly popular investment option for many people. Low interest rates have made repayments more affordable, and rental income can look attractive compared with the return on other investments.

Discount Mortgages offer a wide range of specialist loans for people interested in buy-to-let properties.

What is a buy-to-let mortgage?

These mortgages were created for existing homeowners or first time buyers who want to buy a property for the purpose of letting it out. Although they are similar to other mortgages, there will usually be other conditions attached. The lender will accept a lower loan to value and may also specify requirements regarding length of letting terms and minimal rental income as a percentage of property value. Most lenders will also you to require you to have an income to cover periods of rental voids. We currently have three lenders where no minimum income is required with very competitive rates.

How can I get a buy-to-let mortgage?

Not all High Street lenders will be interested in helping you obtain a “buy to let” mortgage. Discount Mortgages can advise you on several schemes available from top lending sources, and at competitive interest rates.

How much can I borrow?

When deciding how much you can borrow, some lenders may take into account the rent you will earn, as well as your own income. As a general guide, bearing in mind the semi-commercial nature of this type of loan, lenders will normally lend 75%-85% of the property valuation. It may be possible to raise some or all of the deposit needed by considering a remortgage on your existing property.

What to consider when buying an investment property

• Are there busy main roads near the property you are looking to purchase?
• Is there off street parking at the property?
• Are the streets well lit for security and safety?
• How far is the nearest bus stop and how frequent are the buses?
• How far is the property from pubs, clubs, bingo halls, sports centre?
• Is there a local school to the property and how well is it rated with Ofsted?
• Is there a local shopping centre and major supermarket?
• Is there a low or very high crime rate in the area?
• Is there a local hospital or university which is excellent for letting out to doctors or students?
• How much is the Private and DSS rent for properties in the area?
• Is there any regeneration or investment planned for the local area which could mean the property may increase in value or area more desirable in the future?

Will I have to pay a higher mortgage interest rate?

Buy-to-let mortgages are generally slightly more expensive than ordinary home loans but you can do interest only.

Can I get tax relief on a buy-to-let mortgage?

No, but you can offset interest payments on your mortgage against tax on rental income, along with other expenses such as agents fees, insurance, service charge, ground rent and maintenance costs. (New rules apply for higher tax payers from 2017 so check with your accountant)

Is the process very complicated?

As long as you receive the correct advice and assistance, buying a property for renting out is generally a very simple process.

HMO Mortgages & Law around them

While the new laws should not affect landlords’ profits, failure to comply with these laws will result in large fines. The same is also true of mortgage laws relating to houses of multiple occupancy (HMOs). There are new laws governing how investors must manage these properties. Typical HMOs and large student residences or single working or dss tenants, but they can be any similar building where toilet and cooking facilities are shared. There are now investment mortgage guidelines relating to the standard of facilities within the building. The introduction of these investment mortgage laws into the Housing Act has seen many landlords get rid of their HMOs in favour of other types of property, though there have also been many who have seen this as an opportunity to invest. Most HMO properties will require a HMO license which can be obtained from the local council. Each room size would need to meet building regulations along with other building regulation requirements including linked smoke alarms, emergency lighting, self closing fire doors etc. Along with the usual gas saferty cert and electrical cert a yearly maintenance will be required on the fire alarm system.

Discount Mortgages has extensive experience with HMO mortgages and can also provide comprehensive building and contents insurance. As these properties can be high maintenance it is advised to take out good landlords home emergency cover for your boiler and plumbing systems. At this time HMO property purchases are very popular as they can offer high returns. You are typically responsible for all utility bills inc gas,electric, water and council tax. If you are in breach of your HMO licensing agreement you can get fined up to £5000 for each breach so ensure you do regular inspections on your property. Don’t let this put you off as you should be ensuring the property is safe at all times for all residence. Fire hazards are one of the main concerns of the local authorities. While there are not many lenders offering HMO mortgages at the moment new entrants are expected to enter the market in 2012 with higher LTV’s and competitive rates. When looking for the right HMO mortgage call Discount Mortgages as you will be well looked after. Current maximum LTV is 75%. During 2012 it is expected that new lenders into the market will offer 80% LTV HMO mortgages. If your looking for a broker who has access to all the lenders with HMO products then look no further. We just don’t offer HMO mortgages we have hands on practical experience in HMO properties.