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buy to let mortgage
keyan
Posts: 4 Newbie
Can someone please explain??
I have heard of people giving up their day job to begin a career in the property business & ending up with many properties all on a buy to let mortgage!
Now what I can't understand is how they get so many mortgages when they have no income as such! Is the mortgage based on the value of the property rather than the employment of the individual? Do the repayments work the same way as a regular mortgage?
If its as easy as it sounds, then I want a piece of the action!!;)
I have heard of people giving up their day job to begin a career in the property business & ending up with many properties all on a buy to let mortgage!
Now what I can't understand is how they get so many mortgages when they have no income as such! Is the mortgage based on the value of the property rather than the employment of the individual? Do the repayments work the same way as a regular mortgage?
If its as easy as it sounds, then I want a piece of the action!!;)
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Comments
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The buy-to-let mortgage is given on the basis of the rental income of the property, rather than your personal income. The repayments are slightly higher, as the banks generally charge a slightly higher rate of interest for the mortgage. And you also have to pay tax on the income generated by the rent. But the interest on your mortgage as tax exempted.
Its fairly straightforward, but there are quite few pitfalls. There are excel calculators on the internet which let you calculate if the investment and the risk is worth it or not. It all depends on if you can rent the property successfully or not and if your tenants wont wreck the place or not.
Start reading up about it, before you make any decisions.The quickest way to double your money is to fold it in half and put it back in your pocket. :rolleyes:0 -
The issue of repayability is based on rental value, rather than the income of the owner. Although I don;t think they just hand the dosh out like leaflets.
Most mortgage co.s want to see a rental value of 125% of the mortgage payments.
The thing to bear in mind is that the gearing that BTL gives can work against you if prices do fall:
e.g £100k property with £85k mortgage. Rental £530 pcm (£6360 pa)
Values fall 10%, Value now £90k, mortgage £85k. Unable to let. Mortgage cost for 12 months £5525 (interest only).
Repossession.
Unless you buy the right property for the right price in the right area. It can be done, but not without effort. It will also involve either cost (10% minimum managing charge) or effort. Budget for buildings insurance, gas checks, all gas / elec repairs at full cost, replacement of carpets/curtains/decor at regular intervals etc etc.0 -
> If its as easy as it sounds, then I want a piece of the action!!<
Top of the market, I would say
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