buy to let mortgages

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Why buy to let?

In Britain there is a strong instinct towards property ownership. For many people the experience of steadily rising house prices only confirms their trust in bricks and mortar. It is a cornerstone of financial planning that investments should be spread so that you do not have all of your money in one place. Investment in property has proved to be a very reliable investment. Like any investment, you need to choose the right property. Research your market carefully.

Keep focused on the basics. Is the investment return sufficient.
If the sums don't add up then don't buy.
Always consider the downside risk.
Keep some money aside to cover periods when the property is not let.

It is important to have your property let consistently. Think about this, you are about to enter a marketplace, and your property will be in competition with other properties for your tenants. Which one will the tenants choose - the bright, tidy one in the better position?

Buying to let is an investment

It is best viewed as a long term investment. This is because house prices can go down as well as up and if you had to sell in the short term you might lose money.

There is no fixed term to this sort of investment. You can sell the property at any time. Alternatively you could clear the mortgage and retain the property as a source of income.

Buying property to let can be used as an alternative pension income.
If you buy or own a property outright then the net rental income would be the return on your investment.

net profit or = rental income less operating expenses x 100% net rate of return purchase price

Nationally the figure for rate of return is about 7%. This compares favourably with interest bearing accounts however there is a low risk to your capital with interest bearing accounts. The rates of return in your selected area may differ and you should make your own calculation.

Few people will have the resources to buy outright. Most people will opt to borrow the majority of the purchase price. This brings into play the term 'capital gearing'.

If we now enter your mortgage interest payments as an operating expense into the above formula. The net rate of return reduces considerably. The above formula does not take into account the capital value of your property over time.

If you buy a property for £100,000 with a £20,000 deposit, and the capital value increases to £110,000 after 2 years, you could sell up and redeem your mortgage of £80,000 leaving you with £30,000. Your initial investment of £20,000 has increased to £30,000 an increase of 50% over 2 years or 25% p.a. (ignoring the costs of buying and selling).

The above example demonstrates how your investment of £20,000 benefits from price rises in the full value of the property.

	self certification mortgage	standard mortgage	100% mortgage	bad credit mortgage
buy to let	yes - click here	yes - click here	yes - click here	yes - click here