Be Wise with Your Mortgage, Use Mortgage Calculators
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As far as investments go, property is one of the safer bets. Buying a house to let out can be a safe and profitable way to put spare cash to use, and a good way of expanding your assets. While some approach are purely commercial exercise, parents may also buy a place for their children, which they then charge them rent for. This can be seen as investment in both your and your family’s future.
Mortgages available for letting property used to be subject to higher rates of interest than standard residential mortgages, but in recent years this has changed. In an active attempt to encourage growth in the private rental sector of the market, interest rates have been lowered and criteria made more flexible. This led to a boost in the amount of properties being bought as income-producing investments.
Through the help of the Association of Residential Letting Agents (ARLA) with their “Buy-To-Let” program, the letting market was given noticed by the private sector. It’s easier for you to gain the confidence of a lender if you get a letting agent — they can advise you regarding property buying and managing. Under a bonding scheme that members of the ARLA belong to, they can also provide compensation if there’s a problem with rent or deposits.
The rent you charge, as a rule of thumb, should be around 150% of your monthly mortgage repayments. The possible expenses should be covered by the resulting amount — letting can be a profitable form investment if you can manage to successfuly factor in the time and cost involved. My advice as a mortgage broker is that you do your research, so be smart and take your time, try to find online mortgage calculators that will help you to understand how much you will end paying. A good mortgage calculator not only will help you to get a clear picture but it will allow you to understand the fees and the real cost involved in purchasing your propety. Remember that not only will you need to find and purchase suitable property, but you will have to manage it well, whether this means maintenance, furnishing or advertising. An agent can take care of some of these tasks, but bear in mind you will have to pay their fees. Generally, you should think of buying to let as a medium or long term investment.
You should always make sure that a professional agent or solicitor draws up leases and agreements. While you can buy ‘readymade’ leases, these are not comprehensive enough to rely on. Do not lose sight on your other investments in the property also (like furnitures, fittings, etc.).
Other costs to consider are:
Insurance – both buildings and contents, plus you may want to take out rental protection in case a tenant fails to pay.
Service charges and maintenance costs – try to ensure the property will require the minimum of upkeep and repairs.
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