Buy to let mortgages: a guide to buying a home for someone else
By: Jay Tillotson | Posted: 22nd January 2008
A buy-to-let mortgage is a form of investment which can offer more security than the less predictable stock market. It comes with no guarantees, but as the nation gets more in debt and standard mortgage applications are being turned down, people are looking more at renting properties as opposed to climbing the property ladder themselves.
If you are in a fairly stable financial position, you could capitalise on this by looking at buy-to-let mortgages. Do a little research first and seek out others who have had them to hear their views. If the response is positive, take a look around your area. This will help you realise your target audience, and in turn the type of property to go for.
Are there schools, supermarkets, quiet roads? Perhaps a 3 bedroom semi-detached with a garden for a family would be a good idea. Flats located near a business park will attract young professionals. Students will flock to a house near a university. Try looking a little further afield too, you don't have to restrict yourself to your own area. Just make sure you're close enough to visit the property on a fairly regular basis to keep an eye on things.
Once you've decided on a tenant base, start making enquiries about mortgages and house prices in the area of your choice. There are specialist buy-to-let mortgage brokers who will help you select the right mortgage and advise you every step of the way. Most BTL mortgages will only cover 80% of the property value, so you'll need a sizeable deposit. You'll also need to find out the average rent prices in your area and make sure that they will cover the repayments plus money for repairs, taxes and any other costs that will arise.
All mortgages have pitfalls, and a BTL mortgage is no exception. You may have dry periods where the property is empty, or you may find it needs some major repairs doing; you'll need to prepare for any contingencies and add the cost to your rent.
If you don't feel that you could cover all these costs with a reasonable rent for your area, then don't invest just yet. Keep an eye on house prices and consider the possibility for the future instead.
About the Author
J Tillotson is a UK author specialising in Energy and Efficiency
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Tags: target audience, pitfalls, mortgage applications, repayments, financial position, mortgage brokers, house prices, buy to let mortgage, buy to let mortgages, right mortgage, contingencies, young professionals, property ladder, standard mortgage