New to Buy 2 Let, a few queries

paye

hi,

I'm considering purchasing a buy to let property. The demand for rental properties where I live is currently very high with good rental income. Especially around the east London area. i have few queries in regards to buy to let mortgages which I hope someone With experience can help me answer.

1) with a buy to let mortgage, do you have the option to only repay the interest on a monthly basis as Apposed to capital and interest?

2) are lenders likely to charge early repayment fees like a standard mortgage If I decide to sell up within the promotional period?

3)I bought my own home last February would this go against me if I Applied for a buy to let mortgage, and do I have to notify my existing lender if I decide to take out a buy to let mortgage?



4) Finally helpful tips anyone can offer will be much appreciated.

thanks

G_M

paye wrote: »

hi,

1) with a buy to let mortgage, do you have the option to only repay the interest on a monthly basis as Apposed to capital and interest?
in the past yes. Nowadays you'll struggle to get interest only mortgage

2) are lenders likely to charge early repayment fees like a standard mortgage If I decide to sell up within the promotional period?
If you get a product with a promotional period, it will have early repayment penalties. If you have a standard product, then no.

3)I bought my own home last February would this go against me if I Applied for a buy to let mortgage, and do I have to notify my existing lender if I decide to take out a buy to let mortgage?
No, and no.

4) Finally helpful tips anyone can offer will be much appreciated.

New Landlords (information for new or prospective landlords)

paye

G_M wrote: »

New Landlords (information for new or prospective landlords)

Thanks for the reply G-M much appreciated. I just thought of something else ( I will research this further) in regards to tax implications. Say after paying the mortgage I'm left with £600, how much tax would I be expected to pay on this, 20%? Or is it not as simple as that. This will be my first buy to let , I work full time paying 40% tax.

Thanks again.

G_M

Not as simple as that.

Check the link I gave you and go to the HMRC link within it.

And the other links there too. Rather than fire off a few specific Qs as they occur to you, do some research, read up, and then come back with anything you don't understand.

Mallotum_X

You pay tax on the profit. As you are a 40% payer then thats what you will pay on this.

kingstreet

paye wrote: »

1) with a buy to let mortgage, do you have the option to only repay the interest on a monthly basis as Apposed to capital and interest?

BTL lending tends to be centred on interest-only as only the mortgage interest is an allowable expense.

Lenders also base BTL affordability on the rent being at least 125% of the monthly mortgage interest, assuming a mortgage rate of about 6% per annum

2) are lenders likely to charge early repayment fees like a standard mortgage If I decide to sell up within the promotional period?

Yes.

3)I bought my own home last February would this go against me if I Applied for a buy to let mortgage, and do I have to notify my existing lender if I decide to take out a buy to let mortgage?

No and no.

jjlandlord

The main reason people go for interest-only mortgages for BTL is that they improve cash flow and allow to expand faster.

I would suggest that you choose an interest-only mortgage that allows "over-payments", that way to have full flexibility and can repay the capital whenever and however you wish.

alexanderalexander

General advice would be to make sure you understand your obligations and all the issues which can arise, and choose your tenants (and letting agent if you have one) carefully. Get a couple of books on lettings (not "how to get rich quick" books, but ones which actually go through in detail all the practical and legal issues) and read them thoroughly, and follow Landlordzone and other such websites.

Re your specific questions, kingstreet's response covers everything perfectly (G_M's assertion that it's difficult to get interest-only for BTL is incorrect -- he is thinking of new owner-occupier mortgages where it is indeed difficult to get interest-only, but BTL is a completely different ballgame).

dimbo61

Demand for all properties is high in most parts of London.
10 million people live there.
Therefore lots of people want to rent BUT can you make a profit from renting should be your question

bris

Getting an interest only BTL is near impossible with the mainstream lenders, anyone else will have higher interest rates if you can find one that is.


If you already pay 40% tax now then any profit will of course be taxed at 40%.

kingstreet

bris wrote: »

Getting an interest only BTL is near impossible with the mainstream lenders, anyone else will have higher interest rates if you can find one that is

I can't think of a lender not offering interest-only for BTL. Even NatWest which no longer offers IO on residential is still offering BTLs on an IO basis.

The rates are the same regardless of the selection of C&I or IO.

Do you have any examples?