Buy to Let Mortgages

Rising house prices mean that many people are looking at the possibility of buying a property and renting it out. Success depends on the suitability of the property concerned, availability of a cheap buy to let mortgage and the costs involved in turning the property into a desirable let. Many mortgage lenders are worried about the effects of a boom in the buy to let mortgage market and have taken steps to ensure that rent from a property will adequately cover the cost of the home loan they are providing.

In some instances they can insist that rental income is at least 120-140% of the cost of the loan repayments. Add to this the tax implications of renting out property (rental income must be declared to the Inland Revenue) and the cost of equipping the house or flat, and would be landlords are often looking at just about break even.

Making profit on the rent is not the only consideration though. Capital appreciation is a major bonus. If the rent pays for the home loan on the property the landlord will still do well in a market where house prices are rising. If the value of the property increases at around 5 - 10 % a year in a good market, there will be a healthy gain after five years if the property is then sold.

However renting out property is not as straight forward as it might seem. If it is to be rented furnished all fittings must comply with the latest safety standards. This could entail expenditure in the form of sofas and mattresses that comply with fire regulations. If you don't rent through an agency but directly to a tenant be prepared for the possibility of default on the rent and in extreme cases, legal difficulties evicting unwanted occupants.

Housing market experts think that the market for rented property will continue grow helped along in no small part by the growing number of single people who are less willing to commit to their own properties at an early age. But don't assume this will always be the case, take appropriate advice before plunging into the current property market.

Buy to Let Mortgages :