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What is Buy2Let?

There are many mortgage products for residential property investors. One of the more popular schemes is 'Buy-to-Let' mortgage which is designed as an investment vehicle. This is where you buy a property, so that it may be let to earn you rental income. There is an alternative scheme called Let2Buy which is used where you wish to rent out your previous homes in order to buy a new home somewhere else. This scheme is suited to clients who have relocated on a temporary basis which has become permanent. Rather than sell their former home they choose to continue renting it but release the capital so that they can buy a new home.

How much will you be able to borrow?

Amounts can vary from 100,000 to 1m per property. Lenders will usually advance a maximum of 85% of the property price. The rental income must be at least 125% of the mortgage payment or a multiple of your salary, say three times, plus half the rental income. Consult your lender for details of their schemes.

What will be the Interest rates?

Most borrowers for Buy-to-Let prefer Fixed or Capped rate mortgage so that they can plan their income and outgoings. Initially charged commercial rates (or increased rates where borrowers sought consent to let their own home) on loans taken out to buy property to let. Over the years as more and more lenders have entered the Buy2Let market the interest rates are only slightly higher than ordinary home loans. With interest rates currently low the Buy2Let market is attracting more investors than ever before.

Are you buying more than one property?

Some lenders will only lend on one property; others limit you to 2, 5 or 10, and some may have a limit on the overall amount you can borrow.

Can you claim Tax Relief?

Interest payments on your mortgage can be claimed against tax on rental income, along with other expenses such as agents' fees and maintenance costs. Check with the Inland Revenue or your financial advisor for details.

3 Easy Steps to Buy2Let:

1: Location, Location, Location

This is still the mantra for letting a property! We can advise you on the current "hot" locations for the type of property you wish to purchase.

2: Financial advice

How much deposit do you have? Lenders will normally grant a loan to 80% of the property value. As a general guide the rental income should cover at least 125% of the monthly repayments.

3: Do your Sums

See what the rents are for the property you want to buy. Then see if it will cover your repayments. Remember interest rates can go up and you will have to have available funds for repairs, routine maintenance etc. If in doubt consult your financial adviser or bank manager. If you are looking for a quick return then Buy2Let is probably not for you.
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