Buy to let properties and mortgages

The buy to let market has increased enormously over the past ten years as it has become easier to apply for a buy to let mortgage. Originally a small market with only eight providers, it is now possible to approach all the main high street lenders as well as specialist providers. Recent f igures from the Council of Mortgage Lenders suggest that the number of buy-to-let mortgages has risen from 29,000 at the end of 1998 to 475,000 in June 2004. In fact, most investors have grown their property portfolios and 46% of investors own more than one rental property.
There are various reasons for owning more than one property and they range from parents buying the home their children live to let out the spare rooms to the self employed who do not want to pay in to a private pension fund. There are opportunities to make a lot of capital on long term investments or short term busy rental lets, a lot of investors do both and therefore spread their risk. Buying off plan is another opportunity if you prefer to see your capital increase without the need to find tenants. The property’s value would increase whilst the mortgage is not required until the property is finished. A company offering on line applications for their investment property is 1 st Property Investment, click here for more information
If buying for the long term the cost of the property may initially be higher than that for a property bought as a student let where the need for parking spaces and local schools is not a priority.
If you need to renovate the property make sure you are able to pay for the mortgage whilst the work is being carried out. It is important to note that most mortgage providers will not lend against the value of the property post renovation and they will need to have the property valued for rental income and not just take your word for it.
The amount of deposit you will be expected to put down not only varies from lender to lender but from time to time. It can be as little as 11% or as much as 20%. Products offered with a lower rate will not necessarily be available all year, many lenders will have a limit to the physical amount of packages they can offer, when they have reached that limit the offer will change. Many lenders will still expect to see proof of earnings. It is very important to shop around and keep in touch with the current market. Once you have several properties you may find that your lender will be more willing to discuss rate changes with you.

There are tax implications and these should always be discussed with your accountant.

There are areas of expenditure through the year that you can claim against your rental income and these include;

Claim all of the mortgage fees for the year (if you have an interest only mortgage)

You may at some point decide to sell a property and hope to spend the proceeds on a home abroad or spend the profit living in comfort for a few years. That does seem a good way to ease financial pressures, except that you will have to pay capital gains tax on the profits of the sale. Because of this you will need to keep all the records of any financial transactions during the original purchase of the property including;

Taper relief comes into play when deducting the amount of CGT you owe. This relates to the time you have owned the property, particularly good if you have originally lived in it. A 5% deduction is added on a property you have owned for more than 3 years, this increases by 5% each year with a limit of 40%.