Open Vision Finance specialise in the house buying process and have experience within the buy to let sector, so we will be there to support you every step of the way, whether you are considering purchasing your first investment property or if you are an experienced investor.
Becoming a landlord can be quite overwhelming and there is a lot to consider. We have some useful guides to read from trusted lenders we use in this market area. Visit our ‘Useful Downloads’ page for more information.
In order to purchase a buy to let property you will need a deposit, usually a minimum of 25% of the purchase price. There are a few lenders who may offer products with a minimum deposit required of 20%, and these would usually be available to experienced landlords, carrying a much higher interest rate and arrangement fees.
As with every purchase, you will need to remember all of the fees involved with a purchasing a buy to let property such as; the mortgage arrangement costs, a survey fee, the legal fees, stamp duty land tax. For a full list of purchasing fees visit our ‘fees to remember’ page. (Hyperlink)
How a buy to let mortgage works
When lenders are calculating how much they are willing to lend you, they will take into consideration the potential rental income of the property being purchased. Lenders like to make sure that the rental income amount covers your mortgage payments by at least 125%.
Buy to let mortgages are usually arranged on an interest only basis. This means that unless you make overpayments, using the rental income received, the mortgage balance will remain the same at the end of the mortgage term. At the end of the term the mortgage will need to be repaid and if overpayments have not been made the property will need to be sold. We would hope that the value of the property has increased since your original purchase, to enable you to not only repay the outstanding mortgage but also walk away with some profit. You need to be aware that in the current climate property prices can go down as well as up. If you have to sell and the sale price does not cover the mortgage balance, you will need to make up the difference from your own resources.
Open Vision Finance will discuss and advise you of the best way to arrange your finances with regards the buy to let property, in accordance with what you would like to gain from the investment, either a rental yield (profit remaining from your tenants rent – minus your mortgage payment, insurances, maintenance, estate agent fees etc) or capital growth (profit made from selling the property for more than your paid for it).
The interest rate on buy to let mortgages is typically higher than residential mortgages and they also come with higher arrangement fees. Open Vision Finance will be able to give advice and recommendation on the best rate available to you on the market, with regards both the interest rate and the arrangement fees attached to the products.
Get in contact with an adviser at Open Vision Finance to ‘arrange an appointment’. (Hyperlink)
What to consider when buying a buy to let property
- Where to buy your buy to let property – If this is your first investment property, it may be a good idea for the property to be closer to you. This way you will know about the local area and should be able to have a good idea what the demand for rented accommodation is like in this area. If you do decide to purchase further afield do your research, get to know the local area yourself and seek advice from local estate agents or letting agents, who should be able to tell you about the demand for rental accommodation in the area.
- Finding a good tenant – if you know somebody who is reliable and would like to be a tenant in your property, great… however, in most instances finding a tenant can be extremely time consuming, so getting a good letting agent involved to help with this can be a great exercise. Many agents offer a tenant finding service where you pay them a one off fee for finding you a tenant, they will draw up a suitable tenancy agreement, carry out a thorough inventory and check the tenants thoroughly i.e. income, employment history, tenancy history, credit checks and ID checks. You do not need to sign up to any monthly management charges after this service, if you felt you could manage the property by yourself.
Let your agents know what type of tenant you will be happy with and if you have any specific requirements; i.e. non smokers or no pets.
- Void periods – your property may not always be occupied with a paying tenant. When a tenant moves out, the tenant finding process must start again meaning the property may be empty for a short period, so have some money aside in the event of any void periods.
- Property maintenance – as with your own home, things in your buy to let property will go wrong with age and general wear and tear. So it is important to keep funds aside for the general maintenance costs of the property. This could be anything from as little to a loose kitchen door to a broken boiler. Throughout your time of owning a property you will experience maintenance problems… so make sure you have sufficient monies to cover this, to reduce any void periods or re-lets!
Arranging the mortgage
Once you have found the perfect property and had an offer accepted you would need to contact us to arrange the mortgage. All of our advisers at Open Vision Finance have access to the entire mortgage market, with our knowledge and expertise we will be able to recommend the best lender and rate available to you.
We will discuss with you all aspects of the mortgage including how to repay the loan and over what term, what type of rates you have access to and different types of mortgages which may be available to you. Visit our ‘mortgages in more detail’ page or get in contact with an adviser at Open Vision Finance to ‘arrange an appointment’. (Hyperlink)
Arranging the protection
When you take out a mortgage commitment and purchase a property it is important to have in place protection for those dreaded occasional circumstances. This can include any of the following; life and critical illness cover, income protection, buildings and contents insurance or accident and sickness cover. (Hyperlink)
Open Vision Finance can help you arrange all insurances in conjunction with your mortgage application, which will give you one less thing to worry about.
As part of the house buying process you will need to instruct a Solicitor to deal with all of the legal aspects of your purchase. Open Vision Finance understand that it is extremely important to instruct the right professionals to assist with the conveyancing, as it is likely to be your biggest investment.
Open Vision Finance have built various relationships with a small handful of Solicitor firms, all of which we are confident in recommending to our clients, friends and family for their conveyancing needs. Clients who have used our recommended Solicitors have confirmed they have been exceptionally pleased with their services and had complete confidence in them throughout the legal process due to their knowledge, expertise and experience.
For a free no obligation conveyancing quote please complete this online form. ‘Request conveyancing quote’ (Hyperlink)
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
All the above can be conducted by an experienced property management service. Open Vision Finance have a dedicated team of property managers ready and waiting to help you throughout the process, taking any stress away from the buy to let process. With a point of call 24/7 your tenant and property are in the best hands possible. Feel free to speak to us today regarding our fully managed rental property management service.