Householders Guide

Mortgages

If you have a buy to let mortgage you may at some point be counting on selling the property in order to pay back the loan.
Don’t fall into this trap. House prices may fall and you may find the value of the property is much less than you hoped for. If this does happen, it’s then up to you to pay the difference on the mortgage.

In the US and some outer countries, buildings insurance is compulsory and included as a condition of the mortgage. These policies are based on a term contract fixed for a period of time. A premium is then paid to the insurer at the start of each fixed term.
In other countries where buildings insurance is not compulsory, it is still considered an essential requirement.

In countries where buildings insurance is not compulsory, a mortgage provider will insist that you take out a policy with them in exchange for the service they’ve provided you. You will of course have to make your own arrangements regarding contents insurance.

Once you’ve committed to buying a property, the largest ongoing cost undoubtably is the mortgage, which in simple terms, is a loan secured against a property. If you are unable to keep up the repayments the lender can reposes the property.

Most of the major banks will offer you a buy to let mortgage. However, it’s a good idea to talk to a mortgage broker beforehand as they will help you find the best deal suited to your needs.

Typically the maximum amount you can borrow for a buy to let mortgage is linked to potential rental income you’re likely to receive from the property each month. Lenders will looking for a rental income that is 25% – 30% higher than the monthly mortgage payment.

There’re many similarities between a buy to let mortgage and a regular residential mortgage, however with some key differences:

  • Buy to Let mortgages tend to have a higher interest
  • The minimum deposit is likely to be higher
  • Higher fees

Most buy to let mortgages are interest only, therefore nothing is paid off the lump sum until the end of the mortgage term when the loan is repaid in full.

A buy to let mortgage is tailored specifically for landlords to buy a property with the intention to rent out. A buy to let mortgage is usually more expensive than a regular residential mortgage, however, it may pave to way to becoming a property investor.

If you have committed yourself to a buy to let mortgage, you can’t count on the property always having tenants.
There will always be periods when the property will be empty and you’ll need to draw on funds to meet the mortgage repayments.
Also, you’ll need funds incase of any major, or minor repairs , that need to be carried out.

Buying a home is a big step which involves a long term finical commitment. Right from the start it’s important to work out how much you can afford, consider how much money you have coming in and how much is going out. You don’t want to make a commitment to a mortgage and find you can’t afford some of life’s little pleasures. Think about the things you like to spend money on, even when you don’t have a mortgage.