Are you looking to make more profit from investment property? Learn how you
can by using some of the best buy to let mortgage product.
It would be easy to start saying just how easy it is to become a landlord and
earn income from UK investment property
and how you can simply sit back and watch the profit tumble in like a cascading
waterfall. The reality is that there are a number of key issues that you will
have to be involved in to ensure your investment property portfolio works to its
optimum. With tenants to source and vet, an investment property to maintain, buy
to let mortgages to arrange, letting agents to manage and accounts to monitor,
it does take a certain level of commitment. So if you are still keen to have a
slice of the much talked about property game then you will want to read on to
find out how to get started?
Firstly, you need to establish if this is the right time for you to become a
landlord and how much it is going to cost you. Can you afford to tie up money in
a property? If the worst comes to the worst, can you afford to lose that money?
The simplest way to work out the repayments on a buy to let mortgage is to use
an on-line buy to let mortgage calculator.
These can help you work out the best buy to let mortgage product for the type of
UK investment property you are considering and your individual circumstances.
You will need to know the likely rent that can be achieved for the property as
this will determine the maximum loan amount available against the purchase price
or refinancing value of the buy to let property. Lenders normally suggest that
the rental income each month represents at least 130 per cent of the monthly
mortgage payment. Although there are some buy to let products calculated on
ratios of as little as 115%. By working on these calculations, gives the
investor a margin to cover the letting agent's fees and other associated costs.
This is a long-term investment and you need to take the same approach to
investing money into a house or flat as you would to buying into the stock
market. Historically the value of properties have doubled every 10-15 years but
that doesn’t mean to say that there won’t be peaks and troughs in between. These
are times that you have to be prepared and most importantly can afford to ride
Increasing your returns by using buy to let finance to your advantage
For example, lets say you have £100,000 cash to invest into Investment Property.
Is it best to buy a property outright or use this money as deposits on multiple
buy to let properties?
Mr. Jones – decides to use his £100,000 to purchase a brand new property
outright for cash. He lets the property for £600 per month giving a return of
£7,200 per annum. Due to inflation, the rent will increase accordingly and
eventually, after fluctuations in the property market, the house doubles in
Mr. Smith – decides to use £100,000 as deposits (15% for each investment
property) to buy £500,000 worth of properties similar to the one Mr. Jones
bought. This results in Mr. Smith receiving five times as much rental income,
i.e. £3,000 per month or £36,000 per annum. The other £400,000 is borrowed on
buy to let mortgages and Mr. Smith pays interest on this at a rate of
approximately 5%. These monthly interest only repayments would work out to be
£20,000 per annum. Therefore, net of interest they receive £16,000 per annum.
Mr. Smith is already better off than Mr. Jones….. but what happens in years to
come? Well it is probably safe to say that Mr. Jones’s rental income will rise
with inflation as per Mr. Smith. However, Mr. Smith’s buy to let mortgage costs
remain the same. Therefore, the gap between Mr. Jones and Mr. Smith’s rental
income will continue to widen as time goes on. And finally after 10-15 years
when property could have doubled again. Mr. Jones would have made a capital gain
of £100,000 and have £200,000 worth of investment property. Whereas, Mr. Smith
would have made £500,000, which is five times as much capital gain!!
The most successful landlords will use some of the
best buy to let mortgage to fund
their buy to lets and with buy to let mortgage products becoming more
sophisticated and competitive the right buy to let financing can ensure you
maintain your investment property portfolios in such a way that you are always
working to the most optimum cash flow situation.
Best Buy to Let Mortgages
Finding the best buy to let mortgage is crucial to your success as a property
investor. Unlike other forms of investment, a lot of the money you put into a
buy to let property is likely to be borrowed. Over the last few years, the buy
to let mortgage market has boomed, and borrowing money to invest in this way has
become easier than ever. There are a number of different buy to let mortgage
products available from fixed rates, discounted variable rates, discounted rates
and so on. Different products may be suitable for different investment
properties. And don’t be tempted to just go for the cheapest buy to let mortgage
as there may be penalties that make it less attractive in the long term.
Always find out the best buy to let mortgage deals available at the time. Some
investors may decide to retain their entire portfolio with one lender, but it’s
important to realize that different buy to let products between different
lenders can provide you with maximum flexibility and cashlow depending on how
you structure your funding.
However it is very important that you get the correct guidance with your buy to
let finance. You will often find that buy to let mortgage brokers have access to
numerous different products and lenders and some can even offer exclusive
products that wouldn’t necessarily be available to you if you approached the buy
to let lender directly.
Questions that are worth considering when finding the best buy to let mortgage:
Do they have access to lots of different products in the market place?
Do they have the ability to create a long term property development strategy for
Are they able to secure Exclusive Products?
Are they able to arrange mortgages within 10 working days?
Most buy to let lenders will offer a maximum loan of 85% requiring you to fund
at least a 15% deposit towards your UK investment property. The buy to let
mortgage industry is very competitive with new products being launched on a very
Some buy to let mortgage brokers may charge a brokerage fee up to 2% to arrange
the buy to let finance for you but don’t let this put you off because if they do
have the ability to secure exclusive products for you, it could be very
beneficial to your cash flow as a landlord. Plus, if they are able to reach
formal mortgage offer stage in a very short space of time, this could result in
you being able to secure the investment property at very competitive prices if
you have the ability to tell the vendor that you can have the deal completed
within a matter of a few weeks.
How much you can borrow for the buy to let property will usually be worked out
differently to how much you can borrow to buy your main home. Different lenders
and different products carry different criteria for working out the maximum
loans available. Some will lend on how much you earn, others on the rental
income you achieve from the investment property. And sometimes a combination of
How much rent will you make?
Before you agree on the purchase price of a buy to let property, it is important
to find out from local letting agents, what the likely rent could be. They
should be able to let you know which types of property are in highest demand and
which areas are the most sought after for tenants. If you need to find out
whether your potential buy to let is looking like a good investment, ask your
broker/lender to work out the yield (ie the money you are investing and the
rental income you will receive) on the property against what your repayments are
likely to be. I you are investing in an up and coming area, it could still be a
viable investment despite the figures not looking too healthy today. If you
believe that the area will be having a lot of other investment or new businesses
moving in, then there is the possibility that the surrounding property market
will have a positive knock on effect. When the valuation is carried out on the
property, the surveyor who visits the property will also be expected to give an
assessment of the expected rent as well as the value of the property.
A local letting agent is the best person to approach for this kind of
information - especially if you hint that you might let them be the property’s