Archive for the ‘Property’ Category

Putting A Buy To Let Investment To Good Use

Tuesday, October 6th, 2015

05 Putting A Buy To Let Investment To Good UseFor many of us, financial uncertainty seems to be a key feature of life; saving and investing for the future in a time of low interest rates has become immensely challenging.

Many people who have accumulated savings, inherited money or wound up with a significant sum to invest, look instead to the buy to let property market in order provide for their futures.

In this blog post we will explore the best ways of ensuring that buy to let properties can provide for you and your family in retirement.

The golden years

In the decade between 1997 and 2007, property seemed to be all anyone was talking about. The TV stations were bursting at the seams with programmes about property ladders, property fortunes and property presenters.

It was clear, in hindsight, that the property bubble was about to burst.

The moment that a critical mass of people enter the market in one go, assuming that property is a licence to print money, the count down to a crash begins.

In 2008, an era of cheap borrowing, available credit and rising property prices came to an abrupt end and so did the dreams of many who hoped to become property millionaires overnight.

All is not lost, however

Get rich quick schemes aside, property can still be a great way of investing for the future; the rental sector is growing rapidly and predicted to continue expanding over the next decade.

Unless housing is built at a similar pace in order to meet demand, it is likely that rents and therefore rental income will continue to rise.

Most private landlords who own a buy to let property are small time property investors with one or two properties.

These days, the more risk averse banks are reluctant to lend to landlords with dozens of properties, recognising that they represent unacceptable default risk levels.

Banks have to lend money to someone, however, or they cease being banks, so you might find you can get a buy to let mortgage by presenting yourself as a low risk borrower with few liabilities.

Bank, building society or broker

Bank lending rules have become far more stringent since April 2014 and few are now happy to consider a buy to let mortgage without an existing property to put up as collateral.

Helping the next generation

Housing costs in London and other major cities have sky rocketed in recent years and even affluent young professionals find themselves priced out of the housing market.

If you have grown up children and dependents who are unable to buy, you might be able to provide for them and find an investment opportunity at the same time.

You will need landlords’ home insurance if you choose to become a buy to let landlord, as regular insurance policies will not be considered valid and the first concern of any new landlord is ‘insuring my property against possible damage or loss.’

The government’s pension reforms in the past year have left many retirees with a lump sum of cash that they can invest as they see fit, no longer having to purchase an annuity.

By investing in buy to let properties, retirees may be able to use rental incomes to supplement their pensions, and have a property to leave to the next generation in their will.

Raise Money: Downsize To A Smaller Property

Friday, September 25th, 2015

02 Raise Money Downsize To A Smaller PropertyYour current home may well be the place where some of your happiest memories were created. Realistically, however, downsizing may be an excellent way of financing many more. Here is a quick guide to some key questions on the topic.

Why should I downsize my home?

Home may be where the heart is, but property has a financial value. There are various schemes which make it possible to release equity in property while you continue to live in it. These each have their advantages and disadvantages and you would need to do your research thoroughly to decide if one of them was right for you.

Downsizing simply means moving from a more expensive property to a more affordable one. This may be a smaller property and/or one in a different area. This turns home equity into cash, which can be used for other purposes. For example it can be used to help your children get on the property ladder themselves.

The practicalities of downsizing

Downsizing is essentially selling a home and buying another one. This means that you will have to go through the home-selling and home-buying processes again. It also means that you will have to pack up and move your worldly goods.

You will also have to be realistic about whether or not all your current possessions will actually fit into your new home. Instead of feeling sad or stressed about this, it may help to think about it as an opportunity to adjust to your new situation. It may also be appropriate to think about giving inheritances in advance. For example if you have some furniture you love and wanted to pass on, you could pass it on now.

You could look at storage as a temporary option. For example if you’re downsizing to help your children with a deposit, you could store larger items until they have bought their own homes.

You could also find new and possibly better ways of storing and accessing familiar items. Younger people may be able to help with this. For example photo albums can be turned into collections of digital photos. All your precious memories will still be saved – and in a fraction of the space.

You might also like to consider selling some of your excess possessions. This can mean anything from listing them on eBay to selling items through a specialist channel, e.g. an auction. Before disposing of anything for free, you may wish to check to see if it is worth selling. Perhaps some of your memorabilia has historic value, and would be of interest to a local museum.

Downsizing and the family finance

Your main reason for downsizing may be to help your children, but hopefully there will be some money left over for you too. This means that you need to think about how to make best use of it.

Of course, this will depend on your individual situation. For example, you may want to think about how likely it is that you will need to access this money in the near future. If it is important that you can withdraw it quickly, then you will need to keep it somewhere which allows that, such as an instant-access savings account.

If you are confident that you can live without the money for some time, then you have a wider range of options. For example you could put some of it into bonds or invest some of it in stocks and shares. Whatever you do, it should be in line with your plans for retirement and your overall financial goals.

Something For First Time Buyers To Think About

Tuesday, September 1st, 2015

firstthinkIn the past ten years Britain has experienced a property boom, a property crash and a dramatic change in the housing market, making it harder for many people to get on the first rung of the property ladder.

The days of the widely available low cost mortgage might not be with us any more, but that doesn’t mean owning property is impossible.

This blog is a short guide for prospective first time buyers who are looking to invest in bricks and mortar.

Saving a deposit

Early this year there was some sobering news for house buyers, when it was stated that an average deposit was now over £70,000.

This staggering sum is due to the introduction of the stringent new lending rules imposed by the Treasury, to ensure that borrowers can repay their loans.

If you live in Wales the situation is not quite as dire, with the average house price (calculated in December 2014) at £117,000, and a deposit of 30 percent coming to a total of £35,100.

With deposits costing roughly what entire houses cost in the 1990s, it is essential to start saving as much as possible right away.

If you are single, this will mean saving from one income. Couples, with two incomes, obviously have something of an advantage. You may be looking for answers to the question ‘How do I reduce my mortgage payments or at least spread the cost?’

This has led some groups of friends saving for properties together, and has also resulted in more people living with relatives for longer in order to afford a deposit.

Fees involved

You will need to take into account all the additional costs and charges that are incurred during the purchase of a house, from stamp duty to solicitors fees.

Stamp duty is a tax payable on all residential properties with a value of £125,001 or more.

The amount of stamp duty due is calculated as a percentage of the property’s value, and there are several thresholds, depending on the value of the property.

Between £125,001 and £250,000 stamp duty is two percent of the property’s value, thereafter (up to £925,000) it rises to five percent.

Often mortgage lenders will include the cost of solicitors fees for conveyancing (the legal process of purchasing a property) into the mortgage itself. You should calculate the cost of this over the life of the mortgage and decide whether it is cheaper to pay the solicitors fees yourself. Another cost that often gets rolled into the mortgage is the surveyor’s fee.

Without a survey of the property, most lenders will not consider offering a mortgage, they need to know that the house is not going to start falling apart days after you move in.

Again, make sure you calculate over the long term how much this will really cost you and then make your decision accordingly.

Help to Buy

The best news for first time buyers facing exorbitant costs is the government’s Help To Buy scheme. Help to buy is not just limited to first time buyers, but they can access it to purchase any property up to the value of £600,000.

The scheme works as follows. Buyers are expected to put down five percent of the property price, so on a £200,000 house that would mean a deposit of £10,000.

This would be matched by a loan from the government of 20 percent or in this example £40,000, for which borrowers will not be charged for the first five years.

Thereafter they will pay a fee of 1.75 percent of the loan’s value. There will be a variable fee based on the rate of interest in subsequent years.

The more you pay off the actual capital of the loan, the lower the annual charges will be.


Banks may look more favourably on borrowers if they are backed up by a relative offering to stand as a guarantor.

This means that if the borrower defaults, the guarantor agrees to take on the loan repayments. Parents with equity in their own homes may well be the best people to offer this kind of guarantee.


Guide To House Buying Jargon

Tuesday, August 25th, 2015

housebuyingWhen you buy a house, you hear lots of unusual terms.

Here are our ‘dictionary’ definitions of terms used when buying a house to help you understand the convoluted world of property jargon.

Arrangement Fee

As the name suggests, it is the fee that the mortgage lender charges for arranging the loan.


To be behind with ones mortgage payments.

Building survey

The essential survey you must take out on the property, to assess its construction and condition, to make sure it doesn’t collapse the moment you open the front door.


A ‘chain’ of buyers and sellers i.e. the people you are buying the property from are in a ‘chain’ with sellers they are buying from, and you might also be in a chain with buyers of your property. At any given time this chain might, and frequently does, break down.


A payment made to an estate agent on completion of the house sale.


When contracts, keys and monies have changed hands between buyer and seller.


A legally binding agreement.


The complicated legal work your solicitor does to help you buy a property and make sure your rights are protected.


A legal agreement specifying the uses of the land or property.

Credit check

An examination of your previous credit worthiness, debt repayments and defaults. A poor credit score can limit your chances of further borrowing


A document granting legal ownership to a person of a property.

Endowment mortgage

A mortgage paid off by an endowment, which is an investment policy that pays out after a specific and fixed period of time or on the holder’s death.

Exchange of contracts

Where two people exchange contracts over a property.

Fixed rate mortgage

Where the interest rate on a mortgage is fixed for a period of time, normally in anticipation of a future rate rise.


The land beneath the property. Ownership of this is particularly important if you are buying a flat.


The rather dubious practice of offering a higher bid on a property to secure it, after it has been offered to somebody else.


The practice of demanding a lower price on a property at a crucial moment in the sale in the hope that the vendor will agree to prevent the sale from falling through.


Policies that pay out compensation to the holder in the event of accident, damage or ill health.

Interest only mortgage

A mortgage where the actual balance of the loan is not repaid, only the interest payments on the loan.

Land certificate

A document that verifies the ownership of a piece of land.

Land registration

The recording of ones ownership of a particular piece of land.

Land registry fee

The cost of the previous entry.


The ownership of a property for a fixed period of time, normally relating to flats. The leasehold ultimately belongs to the freeholder (see Freehold above).

Loan to value (LTV)

The ratio between the amount borrowed in a mortgage and the value of the property.

Local authority search

A search on a property carried out by your solicitor to find out who legally owns it and who has owned it in the past.


A property loan, typically 25 years in length.

Mortgage deed

The document that aforementioned loan agreement is contained within.

Mortgage indemnity guarantee

An insurance policy taken out by the lender to guarantee against the borrower from defaulting on their mortgage payments.

Mortgage offer

How much the bank will lend you.

Peppercorn rent

A nominal amount, normally £1, needed to satisfy the criteria for the creation of a legal contract.

Repayment mortgage

A mortgage where the borrower repays both the interest and the capital of the loan.

Stamp Duty

A compulsory tax due on all properties over the value of £125,000, calculated as a percentage of the property’s overall value.

Structural survey

A general term to cover three different types of survey, the condition report, the homebuyer’s report and the building survey (see above Building Survey).

Subject to contract

The seller of a property has accepted an offer on the home but the deal is not complete until contracts are exchanged.


The professional who carries out the survey.

Title deeds

A document detailing the ownership of a property.

Under offer

A property where an offer has been accepted and paperwork is pending (see Subject To Contract).


The person(s) selling the property.



Tips For A Cautious Investor

Tuesday, July 28th, 2015

investorWith interest rates offering little to get savers excited, now may be a good time to look at other options.

If you are a first time investor, you may be feeling nervous about taking the plunge. That’s fine; there are a range of low risk investments to help you take your first steps into investing.

Here are some tips to get you started.

You’ll Still Need Some Cash (So Make It Work As Hard As It Can)

Having cash to hand acts as a buffer against life’s ups and downs. How much cash you need to keep depends on your situation. Some people like to keep a couple of months’ salary.

That being so, it’s a good idea to make your cash savings work as hard as they can.

From Autumn this year, ISAs (Individual Savings Accounts) will become more flexible. You will be allowed to withdraw and replace money as you wish.

The only condition is that the net contributions stay within the ISA limit for any given year. This means that all or part of your ISA allowance can essentially be used as a standard savings account. It will have the benefit of allowing you to receive interest on your savings without paying tax.

Look At Government-Backed Schemes

Every now and again, governments introduce schemes to encourage saving and/or investing.

At the moment, first-time buyers building a deposit for a house might like to look at the “Help To Buy ISA”. This scheme is due to start in autumn this year. In short, for every £200 saved, the government will add £50, up to a maximum of £3000.

The government also recently ran a “Pensioner Bonds” scheme for over 65s. This is currently closed, but given its huge popularity, it is entirely possible that it will open again.

It’s always worth keeping an eye open for government-backed schemes as they may offer special benefits.

Make Your Investments Match Your Needs

There is a huge range of investment products available.

Instead of thinking in terms of “good” and “bad”, think in terms of “appropriate” or “inappropriate”. In order to decide whether or not an investment is appropriate, you will need to start by taking stock of your current situation.

In particular, you will need to be realistic as to whether you should start investing right now at all. If you have high-interest debts, you may be better to spend any spare cash you have, on paying them down first.

Once you are ready to start investing, you will need to think about your short-, medium- and long-term goals. You will also need to be realistic about your attitude to risk.

You may have heard the expression “the value of an investment can go down as well as up”. This is true. It is also true that some investments carry more risk than others. Some people are happy to accept higher risk for the possibility of higher reward. Other people prefer to take a safer line in their investment strategy.

Of course it is perfectly possible to divide your investment funds between investments with different levels of risk.

Diversification And Dividends – The Two Pillars Of Investment

You’ve probably heard the saying “don’t put all your eggs in one basket”. That often holds true for investments. Putting all your money into high-risk investments creates the risk of losing it all.

By contrast, putting it all into lower-risk investments means you can miss out on some great returns.

By having a mixture of investments of different degrees of risk, you can have the best of both worlds.

Also remember that investments can be for growth or income or a mixture of both. Many listed companies pay dividends to shareholders. These can be reinvested for more growth or used as income.



Can You Get A Mortgage Before The House Is Built?

Tuesday, July 21st, 2015

mortgagebuildHow do you find your dream home? Well that depends on what your dream home is.

If you’re looking for a character-filled period property then obviously you will need to buy an existing home. If, however, you’d prefer a modern home built to your exact requirements, then maybe it’s time to look at building your own home.

How Do I Build My Own Home?

Building a home is obviously a major undertaking.

First of all you will need to find suitable land. This means a place where you would be happy to live and where you can get planning permission for a house. How easy this will be depends greatly on what part of the country you want to live in. It is likely to be easier to find a plot of land in rural Yorkshire than in Central London.

You will then need to decide exactly what type of home you want. Again a 1 bedroom cottage will be cheaper to build than a 4 bedroom family home. With a self build you can always start small and leave your options open to extend later, e.g. if you start a family.

Finally you have to decide how you want to go about building your new home. If you have the necessary skills you can, of course, build it yourself. Otherwise you will need to get in people to help. If you need professional help then you will need to budget for this.

Budgeting to Build Your Own Home

The budget for your future home can be divided into 4 parts: land, fees and miscellaneous costs, materials and labour.

Land, materials and labour are all essentially self-explanatory. How much you will need to budget for these depends on what you are building, where and how.

As a note of caution, be very realistic about what you can achieve yourself. Your time and health have a value and trying to spread yourself too thinly can be a recipe for struggle if not disaster.

For an accurate budget, you will also need to be prepared for various fees and miscellaneous costs you will encounter along the way. For example, like buying a house, buying a plot of land may require the help of a solicitor. You may also require 3rd-party insurance during the build process. Then there may be connection fees for utilities and other services.

Financing The Build

The good news is that building a home from scratch can work out much cheaper than buying the equivalent property ready-built. The bad news is that self build mortgages are a specialist market.

As fewer people require them, there is less incentive for lenders to offer them at all. There is even less incentive for them to offer the wide range of options and deals available for mortgages on ready-built properties.

In practical terms, most self-build mortgages work along broadly similar lines. The buyer pays the costs up-front and then recovers the money from the lender in stages. This means that people building their own home need to have sufficient funds to hand, to cover each phase of the build process until they are refunded.

It may be possible to find a self-build mortgage which pays the money for each building phase up front. Prospective builders should, however, look carefully at the cost of these mortgages. The convenience may be outweighed by extra charges.

On the subject of extra charges, self build mortgages are likely to be more expensive than traditional mortgages. This is partly because lenders see them as more risky and partly because there is less competition in the self-build market.


Thinking Of Buying A Second Property?

Tuesday, July 14th, 2015

SecondPropertyThe dramatic increase in the cost of properties in the past decade has placed house buying out of the reach of significant sections of society.

Young adults with no capital, low wages and uncertain financial futures stand next to no chance of accessing finance from a bank, but neither do older people with a low level of savings.

Many older people who have rented all their lives or have been council house tenants, find the cost of renting in retirement too high.

The retirees who have owned properties all their lives and who have paid off their mortgages, generally get to enjoy a far better standard of living, than those who have not if they’ve not budgeted for their accommodation.

Some children of retirees who are finding their retirement a struggle have, in recent years, come up with new and innovative financial strategies to help their parents.

If your parents have existed on a low income for much of their lives and they lack the money to put down a deposit on a property (normally 25 percent of the property’s value), banks will be less than enthusiastic to lend to them.

One of the more popular strategies for getting round this is to purchase a second property for retired parents (or any dependent for that matter). Funding a second property and buying a home for a family member can be a great investment and can help to relieve financial pressure for your loved ones.

How to get a second mortgage

If you decide to go down this route, you must be at pains to point out to a potential lender that your parents are not your tenants.

You need to give the bank clear and precise information that distinguishes you from a buy-to-let property owner.

Simply keeping the bank informed about you and your parents needs will prevent you from winding up with a much more expensive mortgage product.

It is important not to be (wrongly) classed as a buy-to-let landlord and only offered specific (and expensive) buy to let mortgage packages.

The banks, in principal, are more than happy to lend you the funds to buy another person a house to live in, without you also having to live on site, as long as it is not a formal tenancy situation.

You might find that with the spiralling costs of university tuition and accommodation, that it makes sense to buy a property for your son or daughter while they are studying.

Again, you need to establish with your bank that you are buying for a relative or dependent and not establishing a formal tenancy agreement as a landlord.


You can access a standard mortgage for another person and agree to take on the responsibility for repayment of the loan, or you can access the equity in your own property.

In the first scenario, the second home is at risk, but in the second scenario, your home is, and the equity that you have built up over the years will be spent.

This means that you need to be careful with such decisions and where possible, access some expert and impartial advice.

You might find that the type of deal you need is not available through your high street lender and consulting an independent advisor could help you access different mortgage products that suit your needs.




Increase Your Savings Vs Paying Your Mortgage Off Early

Tuesday, June 23rd, 2015

SavingsVSMortgagesIn the past six years, the Bank of England has presented home owners who have savings with a dilemma that it is difficult to resolve.

The slashing of the base interest rate to 0.5 percent has resulted in falling rates on mortgages, making borrowing to afford properties cheaper, but it has also seen the return on savings slump.

Therefore, a property owner with spare cash might be less concerned about paying extra on his already cheap home loan, but also might feel less than incentivised to pour cash into a savings account that offers a three percent APR.

This blog doesn’t pretend to have the answers to this particular conundrum and couldn’t give advice even if it did. Instead, in the next few paragraphs we will explore the various options of home owners and savers.

Paying off the mortgage faster.

By paying £10, £20, £50 or £100 extra off your mortgage every month you are speeding up the day that you finally are able to live mortgage free.

Being able to limit the amount of time you spend in hock to the bank will have the effect of cutting down on the overall interest payments you make.

It might seem like quite a sacrifice at the time, but the quicker the debt is repaid the less it will cost you in the long run.

If this is the case, then why doesn’t everyone pay off their mortgages early? Most of us are fixated on spending in the moment and enjoying money while we have it, instead of delaying gratification for the future.

If you are planning to pay off extra on your mortgage every year then you need to ensure it is a sustainable monthly commitment.

Don’t commit to overpaying more than you can afford, it might be easier to start off with a conservative sum that you know will be easy to stick to and gradually increase it as the months go by.

For some over payers the initial excitement and enthusiasm for excess payments wains as the months go by and ambitions slip. Therefore, in order for overpaying to be a serious, realistic strategy it must be maintained over the long term.

Adding to Savings

As mentioned above, the current financial climate is not one that suits savers. There are few incentives for prudent types who have spent years building up their nest egg.

The rates of return, whilst higher than the base rate set by the Bank of England are generally far lower than they were before 2008.

So why save at all?

There are still reasons to save, it is always important to have emergency funds tucked away, irrespective of interest rates.

Also your savings, if put in an ISA will enjoy protection from taxation and will accrue some interest every month.

The rate of interest is also unlikely to remain at a historic low either, meaning that in the next few years the returns on savings will inevitably improve.

The inevitable choice

As interest rates gradually increase, there will be an incentive both to save and to overpay on a mortgage.

Savings will be better rewarded with higher interest, but mortgage debt will be more expensive making it more important to repay it as quickly as possible.

Without a thorough audit of your circumstances and your financial strengths and weaknesses, it is difficult to know precisely which option to take, overpayment or saving.

This means that before you commit to either, it might be an idea to get some independent financial advice.


Should I Fix My Mortgage Now?

Tuesday, June 16th, 2015

FB - FixMortgageDeflation is not all it is cracked up to be. Recently, as we cheered at the fall in fuel prices to historic lows, the fact that several industries were dependent on buoyant oil prices barely occurred to many of us.

However, the current plight of the oil city Aberdeen shows that there are significant problems attached to our current glut of cheap fuel.

Currently we have a glut of cheap borrowing too. Interest rates are at historic low, giving many of us low cost mortgages.

However, the actual amount of credit on offer is tightly regulated, following the housing boom and housing crash.

At the moment, there seems little evidence that an interest rate is in the offing in the short term and home owners are benefiting from the lowest mortgage rates, but even if this lasts, it might not be great for the economy in the long run.

How do I reduce my mortgage payments?

Classical economics suggests that supply and demand reach an equilibrium eventually and that equilibrium is always expressed through the medium of the price mechanism.

We have lived through a half decade of repressed demand in the economy for goods and services (in this case property) due to the long period of belt tightening that we have endured. Supply has remained relatively static, meaning that overall prices have declined or at least stagnated.

There are exceptions to this rule, London and the South East for example, where demand has outstripped supply.

In some sectors of the housing market (luxury six figure properties), spending power has remained largely consistent, meaning that there has been little overall decline.

Lowest interest rates

This decline of spending with the market place has led to a degree of deflation and for property owners this has brought about considerable advantages.

Those home owners on fixed rate mortgage products have been able to switch to variable rates, knowing that in all likelihood the rate won’t really vary all that much and if it does, the base rate set by the Bank of England is still 0.5 of a percent.

In the long term, this, of course, cannot last. The slashing of the cost of borrowing to almost non existent levels has brought about cheap mortgages for many of us, but for savers, it has been little short of disastrous.

Families used to accruing valuable interest off their savings have seen an important source of income and investment lost because of the decision to bring the base rate so low.

Savers will eventually demand to have their fortunes restored and when the Bank of England and the government comply, mortgages will become more expensive once again.

Mortgage Deals

Judging whether or not to take out a fixed rate mortgage now is beyond the scope (and the legal remit) of this blog, and ultimately it is a question that can only be answered by the borrower.

If you are risk averse and value security enough that you are willing to pay slightly more for a feeling that your financial future is more secure, then buying a fixed rate is eminently sensible.

However, if you have speculated that rates will stay low and there is no need to switch to a more expensive fixed rate, then you can stay on a variable deal. This might result in a scramble for a fixed rate policy when rate changes are announced, and at that time the cost of a fixed rate deal will inevitably be higher.


You Can Invest In Property With Buy to Let

Tuesday, May 5th, 2015

You Can Invest In Property With Buy to Let

Back in the day

Ten years ago, nearly every TV show across a wide range of channels was property related. Not only was it cheap, easy TV to make, but the public couldn’t get enough of it.

A Place In The Sun, Property Ladder, that show with Kevin McLeod where people turn barns into mansions, the list was endless.

The vast public appetite for such programmes and for property investment in general was part of a vast bubble that, as we now know, burst in 2008.

It’s easy to be wise after the fact, and Britain’s property market, particularly the buy-to-let market has never quite been the same since.

A super cheap buy to let market between 1997 and 2008 saw large numbers of ‘get rich quick’ casual landlords buy properties in the hope that they would have to do very little in return for a continual income.

Many left the market in 2008, and a few limped on, realising that being a landlord is often quite demanding.

There is still a place for serious buy to letters out there who can work and think strategically to build up a business.

If you are thinking about it as an investment strategy for the future, this blog will give you some useful pointers.

Different finance

You cannot use a conventional mortgage or insurance to buy a buy to let property and switching a regular residential home over to rental use requires a special buy to let mortgage.

Scrimp on this detail and the bank might call in its mortgage altogether.

A mortgage for a rental property will typically have a much higher interest rate than a residential mortgage.

The loan to value percentage (how much of the total value of the property you can actually borrow), is higher for a buy to let mortgage than for a residential mortgage.

This shows that banks are interested in lending to serious investors who can a higher percent of the value of a property themselves.

One aspect of the buy to let mortgage that makes life slightly easier for the purchaser is the fact that they are often interest only.

This means that each monthly repayment covers just the interest payment and not the loan ‘capital’. At the end of the agreement the capital can be repaid by selling the property and the seller can retain any profits.

This presumes, of course, that there are profits. A poor purchasing decision could leave you with negative equity, or you might find, as millions have in the last decade, that markets can slump as well as boom.

Business Strategy

The bank sees the borrower as a business partner, one which it hopes will be fit, healthy and alive towards the end of the agreement.

The risk averse banking sector is no longer throwing money at house buyers (private or rental), and expect a buy to let landlord to take on the bulk of liability.

This means that if you are going into the letting business, you need to make sure that you have a viable business plan.

Are you targeting young professionals, students, married couples or commuters? If you don’t have a niche market in mind, you need to get one before you go any further.

This will determine where, and what you buy. There is no point buying a flat for wealthy young professionals in bedsit land, or a property aimed at families in a row of student houses.

Your Legal Responsibilities

You will also be responsible to the local authority as well as the bank; a rental property has to reach the basic levels of safety, hygiene and energy efficiency.

It might be worth consulting your council’s housing department for further advice on your legal requirements before you proceed.

Remember as well that your property will be liable for council tax payments, a cost that most landlords pass on to the tenants.

If you would like further advice on the kinds of finance available for fledgling buy to let businesses, speak to a financial adviser who deals in mortgage advice.




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