How do buy to let mortgages work?

It is not always possible to guarantee tenant occupancy for 52 weeks of every year and sometimes repairs or refurbishments may be needed. Gas boilers need to be serviced each year, and legally they must have their safety assessed by a qualified engineer. If the boiler stops working, then it may need expensive repairs or even replacement and a landlord must have a way of covering unforeseen costs of this type.

It is generally necessary to have some cash put aside to take care of emergencies. You will also need additional funds to cover the cost of stamp duty, which is higher when buying to let, more so as your portfolio increases.

When looking for your mortgage, you can, of course, approach banks, or even look online. However, mortgage brokers such as The Mortgage Hut, which specialises in the buy to let field will have a better idea as to what is available and can provide more informed advice on the best way to proceed, especially if your personal circumstances are a little different from those that lenders hold up as the ideal.

Once you have secured the property, there may be tax issues to consider as well, including the income generated each year and any profit on eventually selling the property which may be subject to capital gains tax. We would recommend that you consult a tax adviser in this regard.

In theory, just about anyone can buy a property to let, provided that they fulfil certain criteria. First of all, a mortgage of this type is an instrument for investing in a house or a flat that you will not be living in yourself. Therefore, you need to have considered all the ramifications of investing in the property market and any risks that this might involve. You may need to own your own residential property, whether still mortgaged or fully paid for.

Ideally, when embarking on a buy to let venture, your personal debt and finances will be managed well, as large personal debts can deter some lenders.

• A good credit record will always be a benefit when looking for any kind of mortgage.
• A stable income is also a prerequisite, usually in excess of £25,000 annually.
• Many lenders are wary of prospective mortgagees who cannot demonstrate how they will make their repayments each month.
• The age of the applicant can also play a role in being approved for a mortgage. Most lenders want applicants to have reached a maximum age of around 75 on completion of the mortgage term. So if you are 60 and applying for a buy to let mortgage, the term of the mortgage would probably be only 15 years or so. It is not always easy to line up a mortgage when you are on the verge of retiring.