Capital Investment Mortgage
Capital Investment Mortgage | Too Risky For New Landlords?
So you've decided to get a capital investment mortgage (generally referred to as a buy to let mortgage), tempted by the prospect of easy money. And it's true, thousands of landlords are making a steady profit every year from their property portfolios. Paragon Mortgages recently estimated that landlords made a 9.3% year on year growth on rental income. Total return on a 12 month investment stood at £16,668 in June 2008. With such a good return, a capital investment mortgage is bound to make sense.
Well, it does, but as with any investment, there are risks involved, and a savvy landlord will assess those risks before taking out an investment mortgage. Here are some of the issues to think about before taking out a capital investment mortgage.
A key part of a successful return on your capital investment mortgage is the choice of property. In addition for checking the location (near to public transport) and the amenities (near to good schools, shops and entertainment), it is also worth thinking about the condition of the property itself. You might be planning to use some of the money from your capital investment mortgage for refurbishment, especially if your BTL mortgage allows additional borrowing at the same rate. However, your property might need more renovation than you had anticipated and this will take a chunk out of your mortgage. Structural repairs can be expensive, so if in doubt, spend a little extra on a better survey so you will know the true cost of your investment mortgage.
Just because you have an investment mortgage in place, it is not a foregone conclusion that your investment will be successful. A key issue after securing your capital investment mortgage is to make sure that your property is let. Of course, you may not always be able to control this. Tenants may leave for other properties or to buy homes of their own and your property might be vacant for a while. Meanwhile your mortgage still has to be repaid. If there are too many rental properties available, you may have to lower your rent, too.
Keeping BTL Payments Up To Date
There are two ways of handling this issue so you can keep repaying your mortgage. The first is to make 
sure your rental figure has some leeway to cover vacant periods and the second is to use a letting agent to reduce vacant periods between lets. The letting agent will be skilled in getting the right sort of tenants and using the right sort of tenancy agreement for your protection.
Other things that might affect your ability to repay your mortgage are issues that cause damage to your property. However, most investment mortgage lenders will insist that you have buildings insurance in place to cover the cost of rebuilding the property. In addition, anyone with a capital investment mortgage would be wise to insure their own belongings with a contents insurance policy.
Although investing in buy to let can be risky, there's no reason that landlords can't make a good return on their investment, especially if the property is well researched and well managed. If this is the case, there's no need to shy away from a capital investment mortgage.
