Mortgage Meadow / Help / Buy To Let Mortgages helpdesk

Purchasing a Buy to Let property will cost you more in terms of upfront and on going costs, than purchasing a residential property. The main upfront cost in purchasing a Buy to Let property is the size of the deposit. With Buy to Let properties most lenders will lend up to 80%-85% of the property's value, this means that you will need to find to find the other 15%-20% from your own resources. Lenders limit the mortgage on Buy to Let properties to 80%-85% due to the increased risk they feel that lending on a Buy to Let property involves. Most lenders charge higher interest rates and administration fees for Buy to Let mortgages. This is due to the increased work that lending on buy to let properties involves and the perception that Buy to Let lending involves more risk. Valuation fees will also be more expensive than with residential property. This is because as well as stating the value of the property, the valuer will also have to research the local rental make, this takes time, which invariably costs money hence the higher amount for a valuation. There are extra obligations placed on the solicitor before completion can take place on a Buy to Let purchase. This is why a solicitor will often quote more than for a residential purchase. If you intend to let your property through a letting agent, and agree a letting only service, the letting agent will generally take between 8%-10% of the monthly rental income in commission each month. if the letting agent is undertaking full management of the property, you should expect to pay between 15-20% of the monthly rental income in commission to the letting agent each month. Remember if items go wrong such as white goods, or there is a problem with the property itself, your tenants will expect them to be replaced or repaired quickly. This could mean large unexpected costs. To prevent this, it is advisable to have specialist buildings and contents insurance in place and maintenance contracts on items such as fridges and boilers. These types of products will mean on going monthly costs to you, but if you need to claim may save you thousands of pounds in the long run. We would also suggest setting up a contingency fund to pay for untenanted periods. We would suggest a minimum of 6 months mortgage payments are set aside so that you are not faced with paying your buy to let mortgage and your residential mortgage from your earned income alone.

In general Buy to Let mortgages are not regulated by the Financial Services Authority