Buy To Let Mortgages In UK
Buy To Let Mortgages In UK | The Facts You Should Know Revealed
Getting buy to let mortgages in UK financial institutions is not quite the same as getting a residential mortgage, and this is something which new investor landlords need to know. The cost to landlords of buy to let mortgages in UK banks and building societies is likely to be higher than most people would shell out for buying their own home. It is worth taking this into account when planning for a BTL investment.
One reason why the cost of buy to let mortgages is higher than residential mortgages is that lenders consider BTL a greater risk than a residential loan. As such, interest rates on buy to let mortgages are likely to be as much as one percentage point higher than for a residential mortgage. This can make a considerable difference across the whole term of a BTL mortgage.
Getting buy to let mortgages in UK banks and building societies also means having to have a higher deposit than with a residential mortgage. Although there are some 85 per cent BTL mortgage deals around, it is more usual for landlords to pay deposits of up to 25 per cent. And landlords who are getting high value buy to let mortgages in UK building societies and banks may have to pay even more. Based on the current market, deposits of up to 50 per cent can be expected for loans over a million pounds.
Additional Fees For BTL
Survey and valuation fees are part of any mortgage, and buy to let mortgages are no exception. In some cases, buy to let mortgages in UK financial institutions attract the same valuation rates as for residential mortgages, but they can also be higher. In addition, there are broker's fees of around 1.5 per cent to be taken into account. Despite the fee, there is some value of seeking buy to let mortgages in UK brokerage firms, because landlords can be sure they have the pick of a wider range of deals that are suited to their circumstances.
Some lenders stipulate that a professional letting agent must be used to manage a buy to let property and this will increase the cost of buy to let mortgages. Though this is not directly a mortgage cost, it still has to come out of landlords' pockets. Landlords can expect to pay 15 to 20 per cent of the rental figure for this service.
Other charges to add on to the outlay for buy to let mortgages are any service charges for leasehold properties and insurance costs. This is not just buildings and contents insurance, but covers legal fees if an eviction is needed, damage to the property by tenants and loss of rent if the property is vacant.
Finally, there is capital gains tax to consider. This will be charged on any increase in property value. There is an annual allowance below which capital gains tax will not be charged and there are other expenses that can be set off against it. This will mitigate some of the outgoings on buy to let mortgages in UK financial institutions.
