If you are thinking of buying a house to rent out then you’ll probably need to apply for a buy-to-let mortgage, which allows you to buy a second home to rent out for the purpose of income or capital growth.
There are three main characteristics that make a buy-to-let mortgage different from other types of mortgages. These are:
Rent Potential – a mortgage lender will take into consideration how much rent you will earn from the property on top of your current income. But in some cases your other income will not even be looked at because the potential earnings from the property will be enough to secure a loan.
Interest Rate – buy to let mortgages tend to have slightly higher interest rates due to the fact it is a second mortgage and you will make a profit from the rent.
Larger Deposit – most mortgage lenders will require a minimum deposit of 20 or 25 per cent of the property's value to secure a buy-to-let mortgage. However, each mortgage lender has different rules for this so make sure you shop around for the best deal.
Before you buy a house to rent out you need to decide whether your main objective is income or capital growth. This basically means you have to decide whether you want to make a profit month on month or make a profit through increased equity from the second property as its value rises over time. This decision will probably affect the type of property you buy and the location of it.
Along with a buy-to-let mortgage there are other costs involved in renting out a house, including maintenance costs, letting agent’s fees, ground rent, and insurance. These should be taken into account before you buy a property to rent out.
Click here for more information about buy-to-let mortgages from www.localmortgagebroker.co.uk