With some of the new mortgage offers coming on stream at the moment offering record low interest rates and a housing market with slowly rising prices, now is a good time to become a landlord. Rental demands are still increasing as more people find it difficult to meet the high deposit requirements of lenders, so if you are in a position to invest some money in property, this is an excellent time to do it. There are downsides to being a landlord, but taken overall, the buy to let market is buoyant.
Mortgage lending to buy-to-let landlords reached £4.2bn across 33,500 loans in the first quarter of 2013, according to the Council of Mortgage Lenders (CML) and by the end of March it accounted for 13.4 per cent of total mortgage lending in the UK. Although the rise is relatively small, this is up from 13 per cent in the previous quarter. Many building societies and banks are offering very good deals to those wishing to buy to let as this may well have a good long term effect on the property market as a whole, giving it a much needed boost.
When you are making out your business plan, you must remember that getting the mortgage or other finance for the property is not the end of the outlay. You will also have estate agent’s fees to find as well as having to take out special insurance as a landlord. Every property you rent must have safety certificates which need the input of professionals and there is also stamp duty to pay on any property over £125,001 in value. Many new landlords fall at the first fence by not taking these additional costs into consideration.
Most lenders will need a new landlord to have some earned income from another source, but how much you can borrow will also depend on the potential rental income. Because the market in rental properties is currently doing well, this is not usually too much of a problem and some building societies are offering rates of well below 3% if the sums add up. As a general guide, you would need a rental income of almost £1000 a month to be able to borrow £150,000 so depending on area of the country, you might need to raise quite a substantial deposit to get started.
Something that many people don’t realise is that if you move out of your home and plan to rent it out, you will need to change your existing mortgage into a buy to let one. Some lenders allow the old mortgage to continue for a while if this is a temporary situation, but there will be a fee to pay. It is important not to simply rent your home out and not tell anyone – your mortgage and buildings insurance will both be breached if you do and it could be very serious. To be part of the buy to let boom which is going on currently it is essential to play by the rules.
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