Buy To Let Mortgages have increased in popularity over recent years and Birmingham offers a great rental area. Some of the surrounding areas including Lichfield, Wolverhampton & Walsall can also offer some excellent buy to let possibilities. The main reasons behind this are:
- The potential for excellent long term capital growth.
- An additional source of income for retirement.
- High demand for rental accommodation in the Birmingham and surrounding areas due to an increasing UK population, increase in single occupancy homes due to a high divorce rate, and a growing number of students taking degrees.
- Having a property as an alternative investment to an existing investment portfolio.
- More lenders having entered the market leading to more competitive, specifically designed, accessible buy to let mortgages.
Buy to let mortgages differ to ordinary residential mortgages in 3 main ways:
Rental – lenders will assess your buy to let mortgage based upon the rent you are likely to receive as well as your income. In some cases your income is not ever considered.
Interest Rate – Buy to let mortgages tend to have a slightly higher interest rate.
Larger Deposit – a buy to let mortgage will typically require a minimum deposit of 25% of the property’s value.
When purchasing a buy to let property you will need to decide whether your primary objective is income or capital growth. Your decision may affect the type of property you purchase, the location and whether you opt for a repayment or interest only mortgage.
A buy to let is a long term investment but if you have to sell and house prices have fallen, you would have to make up any shortfall. If you sell for a profit, you may have to pay capital gains tax which would eat into your profit.
A mortgage is a loan secured against your property. Your property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Please Note: The Financial Conduct Authority does not regulate most forms of buy-to-let mortgage.