Buy to Let mortgages – an overview
With more people now renting than owning their homes, rental properties are in demand. Not only that, but the London property market continues to grow steadily, making London property a relatively sound investment. If you have the spare capital to put down a deposit on a property other than your home, now could be a good time to invest in London property and become a landlord. To do that, you will probably need a Buy To Let (BTL) mortgage. Here’s a broad overview to help you decide if buying-to-let is right for you.
What is a Buy To Let mortgage?
BTL mortgage repayments are covered by the rent collected by the landlord every month. They are usually interest-only, which means that initially you only pay back the interest on the sum you borrowed, but you pay back the full value of the property at the end of the mortgage.
Are Buy-to-Let mortgages more expensive than homeowner mortgages?
In a word, yes. Lenders see BTL borrowers as a higher risk than homeowners. This is because landlords depend on receiving rent each month to cover their repayments. However, as all landlords know, you can have difficult months, for example when a tenant moves out but you cannot find a new tenant immediately. This means that BTL borrowers are usually charged higher fees and need to come up with a larger deposit than people borrowing for their first home.
On the positive side, this London property market is known for moving quickly, and it is unusual to have rental properties vacant for more than a few weeks. (If your rental property has been vacant for ages, something maybe amiss – talk to us and we’ll help you get back on track)
With bigger deposits also comes more peace of mind, because you know you’ve embarked on an enterprise you can afford.
What happens at the end of the mortgage?
If your BTL mortgage is interest-only, you’ll have to pay back the percentage of the property price you borrowed. Many landlords cover this cost by selling the property. If the property has increased in value, you’ll be better off financially than you were when you first bought it. Again, this is where the London property market is on your side, with most areas showing a steady rise in house prices.
Let your East London property
East London will always be popular with young professionals, many of whom blow in from other parts of the country and need homes to rent while they get their careers underway in Docklands or the City.
If you have property in East London available for rent, contact me, Adam Dockley, today on 020 3633 4440 to find out how we can help you get the best return on your investment.
While I do know the basics of mortgages, I’m an estate agent, not a mortgage broker! Before you embark on a BTL mortgage, talk to a qualified mortgage broker and find out if this is the right investment for you.