Mortgage advice for investment property

Investing in property can often be a good idea, as often property offers a good return on investment. There are two ways in which property might make a good return: the first is the obvious rental income, and the second is the value of the rental property which may also increase over time.

However, buying any kind of property is a long term investment, so here are a number of questions which might help you decide whether this is for you.

What rent might I expect from the property I intend to buy?

You need to have a good idea of how much people might pay to rent your property. This will help decide how much you can afford to pay for the mortgage. Try researching rental prices in the local area and speaking with reputable lettings agents.

Rental income levels would typically need to be between 125% and 145% of the monthly rental payments, and lenders may add in some room to allow for unexpected expenses you, as a landlord may incur, such as having to replace a boiler.

What costs might I need to think about?

You need to consider other costs you may incur as landlord. This includes renovation work you might do prior to renting, but also maintenance costs on an ongoing basis and emergency repairs.

You will also need to think about legal insurance, letting agent fees, ground rent or leasehold fees, and upkeep of appliances such as boilers, cookers etc.

How much deposit do I need?

Typically you will need a larger deposit for your investment property than would be the case for a residential property. 25% of the property value would be a typical requirement.

Do Buy-to-Let mortgages vary?

Yes. Just like private mortgages, there are different lenders with different criteria. Perhaps even more so than private mortgages, it’s important to speak to an adviser about the kind of mortgage you need – We can help you get that healthy profit from your investment!

What’s the difference between a residential mortgage and a Buy-to-Let mortgage?

Often a Buy-to-Let mortgage attracts a higher interest rate than a standard private mortgage. This means that like-for-like, you will pay more for your BTL mortgage.

BTL mortgages can be more complex to organise than residential ones, and some lenders don’t accept direct applications, meaning that you must use a broker to access some products.

If you are thinking about making this kind of investment we strongly advise you to speak to your adviser who can help.

Are there age limits on Buy-to-Let mortgages?

Minimum and maximum age limits do vary between lenders, but age ranges can be as young as 18, and right up to age 85.

Borrower status information

This could be your first venture into investment property, or you might be a seasoned investor with a portfolio of property.

Individual lenders will have their own preferences, but McRobieAdams advisers are able to help you find the right lender for your needs.

Do I need to be a UK resident?

Lenders tend to prefer UK residents for these kinds of products, but there are some who accept ex-pat borrowers.

Am I guaranteed a profit from this kind of investment?

Well, no. As landlord, you will be required to pay the mortgage even if the property is empty, and it is possible that the property may remain empty between tenants.

If you are relying on the value of the property increasing, then you need to remember that property prices may stagnate or shrink, so there is not a guaranteed return from the capital.

When you sell the property you may also be subject to tax.

Tax

Landlords are taxed differently from private property owners. You will pay additional stamp duty when you buy, and you will pay Income Tax on the rental income you receive from your tenants.

You may also have to pay Capital Gains Tax when you sell the property.

Why McRobieAdams?

Finding the right Buy-to-Let Mortgage product can be tricky. Getting the wrong product can reduce your profits, so it is important to take good advice about you and your investment plan.

McRobieAdams have a wealth of experience in sourcing products from whole of market sources. This means that we are fully independent, and can assess many different lenders to get the best product for you.

Some lenders don’t accept direct applications, meaning that you must use a broker (also known as an ‘intermediary’) to access some products. We’re here to help, why not give us a call?