Mortgage Advice for Landlords

Becoming a private landlord should not be seen as an easy way of making money. It can be risky and complicated. However, if done properly with proper buy to let mortgage advice, it can also potentially be an effective form of investment.

What is Buy-to-Let?

When an individual or a Limited Company purchases a property with the intention of letting it out to tenants, it is known as ‘buy to let’. This can be both a way of making a regular income and a fantastic investment opportunity for the future.

As a private landlord, you can get access to specific buy to let mortgages to suit your circumstances. If you’re in doubt about whether buy to let is for you, how to calculate rent and which mortgage product to choose, we’re here to help!

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What Makes a Buy-To-Let Mortgage Different?

Although being a private landlord can be a great investment opportunity, it’s not always an easy path to money. The buy to let process can be very time-consuming, confusing and even financially risky. Before diving into becoming a private landlord, it’s important to seek independent buy to let mortgage advice. This way, you’ll make the right decision for your budget, requirements and long-term goals.

There are three key differences in buy to let mortgages:

Interest Rates

You can expect slightly higher interest rates from buy-to-let mortgages.

Rent Potential

Research similar properties in the area to gain a fair understanding of the property’s rent potential.

Larger Deposit

Typically, you will be required to provide a minimum of 20% or 25% of the property’s value as deposit.

Things to Consider Before Buying to Let

When buying a second property to let, you will need to decide whether your primary objective is income or capital growth. In other words, are you looking to make a profit month on month or are you looking to make a profit through increased equity from the second property if it increases in value over time? The decision may affect the type of property you purchase, and the location.

Don’t forget, when you manage a property you don’t just have to pay the mortgage. There can be many other fees and costs to being a private landlord. As a guide, you should be aiming to achieve a gross rent of about 135% of the rental property interest only mortgage repayments in order to cover your costs should anything go wrong.

Additional costs may include:

● Voids

If you don’t have a tenant you still have financial responsibilities, you will still be liable for the mortgage payments, full council tax and your landlords’ buildings insurance. Our mortgage advisor will discuss how best to protect against these risks.

● Property upkeep

As the landlord, you’ll be liable for the maintenance costs for the property. This can be anything from regular upkeep to emergencies such as a broken boiler.

● Letting agent’s fees

You can expect letting agents to charge around 10% of the monthly rent for finding and vetting tenants, with an additional cost of around 10% if you require a full management service.

● Ground rent / service charges

Keep an eye out for these fees if you purchase a leasehold property.

● Legal insurance

This is required to cover costs from evicting tenants in the event of non-payment, very important, as it can be very expensive.

● Insurance

Building insurance and contents insurance for the items provided as part of the rental agreement. Luckily, we can advise on that too!

● Furnishings

If the property is to be let furnished, make sure you are covered for this by your home insurance.

● Gas / electrical appliances

Cost of maintaining appliances and ensuring they comply with any regulations such as safety tests.

● Decorating costs

The property may require work ranging from painting skirting boards all the way to fitting a new bathroom suite.

When choosing a property to let, it is wise to take advice from local letting agents to determine; what types of properties are in need and which parts of the town are best or most wanted. They can tell you if there is a University in the town, and if students are looking for somewhere to live.

Our advisers are fully versed in providing independent buy-to-let mortgage advice. We’ll guide you through the strategies involved in successfully buying and running an investment property. Get in touch today to start your buy-to-let journey.

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A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST FORMS OF BUY-TO-LET MORTGAGES.
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