Here are a pick of some of the most Frequently Asked Questions put to us…
Can I Buy a Buy to Let property if I do not already own a property?
This is possible but difficult. This is because the vast majority of lenders will require you to own your own residential property before they can provide you with an offer.
What are the risks of a Buy to Let mortgage?
Well, the value of the property can go down and it may be the case that the costs involved exceed what you initially expected i.e. there may be some costly structural repairs that need to be carried out.
It also may not be a guarantee that you can keep increasing your rent if the market reaches a standstill. Your rental income may stay the same or may even fall. In addition, you need to factor in for times in between tenants when the property is left empty and there is no rental income.
How much deposit is required?
The more the better! Generally, lenders will expect higher deposits than on a residential mortgage. The higher the deposit, the better the mortgage offer you will receive. This in turn can mean lower mortgage rates and lower monthly payments. Lenders expect anywhere between 15%-25% as a minimum. The reasoning behind this is because they associate these type of mortgages as more risky and therefore would like as much as possible upfront.
Are there specific type of property that lenders will be unwilling to give a Buy to Let mortgage on?
There are a few types which may limit your chances of obtaining a Buy to Let mortgage. They are as follows:
- High rise flats- often a restriction is placed on how many floors
- Holiday homes- a lender will want to see regular rental income and may have doubts about this type of property
- Flats above shops and offices
- New build flats-lenders will want a bigger deposit
- Ex local authority-lenders will have certain criteria to look for and depending on certain factors may grant a Buy to Let mortgage on this type of property.
Will I be responsible for managing the property?
This is your choice. However, if you want a hassle free experience, then it is advisable that you ask an agent to provide management services on your property. They will assist with tenancy agreements, renewals, recovering the rent, deposits, repairs and inventories amongst other things. You can select what particular services you want and they will assist in ensuring you have peace of mind. It is important to note that you will have to negotiate a fee for their services and this is usually deducted as a percentage amount from your monthly rental income.
Will I need a tenancy agreement?
Yes- your lender will request this.
Conveyancing
Having a Solicitor or Licensed Conveyance is a key part of the home buying process whether you are buying your first home, re-mortgaging or moving house. Conveyancing deals with the legal side of purchasing a property. They deal with a range of tasks including dealing with the Land Registry, sorting out the Stamp Duty Land tax that needs to be paid, checking and advising you on the draft contract, doing all of the relevant searches so there are no nasty surprises later on and collecting and transferring funds. They will provide you with expert legal advice from the pre contract stage up to completion following exchange of the contracts.
It is important you choose the right person who is specialized in dealing in this area of law. You can negotiate a no sale no fee agreement. A fixed fee service is advisable so there are no surprise additional costs later on. Some Solicitors will offer a fixed fee and others will require a percentage fee from the property value. Some will also include additional charges for any unforeseen circumstances or extras. It is critical that you choose a Solicitor or Licensed Conveyancer who can provide a quality service and can give your case time and attention. Conveyancing fees will vary and depend on the value of the property, the complexity of the property transaction and whether you are just buying or selling and buying another home.
