Mortgage For Renting Property
Business
lending is not regulated by the Financial Services
Authority. As you are collecting money from
a tenant the mortgage
may potentially be regarded as a special commercial
type of loan or a buy to let. Most landlords
are looking to make a profit perhaps only from
capital appreciation in time which is why many
only go for an interest only mortgage which
would also have tax advantages whilst making
lower overheads to their business of renting
property.
Many
high street lenders now cater for this type
of lending as it has boomed in the UK over the
last 10 years with the high rise of property
prices and lower returns on investments. Many
people regard this as a future nest egg or type
of pension. If the property was purchased a
few years ago the rental income can be high
for profit but a recent purchase would be lower
as the higher property prices mean on average
landlords have to have a higher mortgage to
cover the purchase.
Let
to buy
A
let to buy mortgage is where your mortgage company
will allow you to purchase a new property to
live in and rent out your old property with
them. If the rent adequately covers the original
mortgage then the lender potentially may except
you servicing two mortgages if all of the lender's
standard criteria is met.
Letting
Mortgage
When
deciding to buy to let property caution should
always be taken as there are no guarantees of
rising house prices and rental income may fall
with market saturation. Also you may have dead
times (means that you are responsible
for maintaining the mortgagee until such times
as this situation has been rectified) in
the rent when good tenants are hard and expensive
to find. Tenants can cause huge problems with
landlords for example not paying rent, disagreements,
property abuse and damage. Letting a property
can be risky and very stressful. Students and
DHSS tenants potentially may be higher risk
due to low income. Low rental income indicated
from the valuation report may mean placing a
higher deposit down against the loan. Property
management companies may also have to be employed
to manage and find tenants.
Unknown
factors may go against a property for example
if it is a flat above a shop that was kinetically
one type of business that did not disturb the
tenants or property valuation for example a
flower shop, but a business change could be
a nuisance and reduce the valuation if the new
business owners had a late night taken away.
Landlords
insurance
The
landlord will have to have specialist landlords'
insurance in place. With a letting mortgage
this will be mandatory and the solicitor will
want to see a policy in place with the lender's
name on the schedule along with the correct
sum insured for rebuild costs. This only covers
the rebuild costs but not the current market
value on the buy to let property. Standard residential
building and content insurance will not be valid.
The tenants may wish to purchase their own contents
insurance. If the landlord supplies a fully
furnished property to rent then he may put content
insurance in place to protect the contents supplied.
Tenants can often take less care of a property
than an owner as they regard the property as
temporary and not theirs.
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