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Buy to Let
A buy to let property is a semi commercial mortgage on a property which is let out on an assured short hold tenancy that you do not live in.
Typically the deposit required is 15% of the value or purchase price.
The rent from the property is supposed to cover the cost of the borrowing and in most cases with a margin to allow for an increase in interest rates. The calculation for rental varies from lender to lender therefore it is not guaranteed that all lenders will arrive at the same figures in relation to the rent required for the money mortgaged on the property.
It should be remembered that in the event of the buy to let property being empty with no tenants, then you the mortgagee is liable for the mortgage payments plus running costs of the house, similarly if the rent received does not cover the mortgage and other associated costs then you are liable for the difference.
One also has to take into account the tax implications on the rent received plus potential capital gains on disposal of the property in the future.
Why are Buy To Let properties so popular then? Well lots of people have purchased by releasing equity in their residential property by re mortgaging and raising the deposit and associated costs because in a rising market you have two or more properties increasing in value. It is a good way of increasing one’s assets and or helping towards retirement income in the future. The rent is the rent of the day and with the price of housing as it is it is difficult for first time buyers to get onto the property ladder and therefore there is a rental demand for the right type of property.
The buy to let market has slowed down because the increased value of properties means that invariably a large deposit in excess of 15% could be needed in order to make the property viable in the first place.
There are still bargains to be had out there and the buy to let re mortgage remains as strong as ever.
There is a current trend to look abroad for opportunity of a cheaper interest rate and buying off plan. Should this be of interest to your then please do not hesitate to give is a ring.
