Lots of banks and building societies offer buy-to-let mortgages, but often at more stringent terms than a conventional mortgage. One typical mortgage on offer stipulates that the borrower must be over 25 years of age. The person needs a minimum deposit of 25% (property value or purchase price, if lower). The maximum loan can not exceed £1 million. Usually there are also requirements covering the minimum annual rental collectible on the property which must equate to a percentage over and above the interest payable to the loan company. And buy-to-let mortgages are usually provided at a higher interest rate.
The problems arise though when properties have to be brought up to a high enough standard to be able to be rented out. That sometimes adds a financial burden on the owner more than originally anticipated. The would-be landlord needs to find a good agent to handle the tenancies, and they cost money of course, usually in the form of 5 commissions. He has to consider insurance requirements, such as that for buildings so he's protected should something unforeseen happen. And he has to have a regular source of income from his tenants, with only short term breaks in between tenancies. And finally, those tenants who live in his property have to pay on time.
The problem is that a landlord's costs may rise, his tenants may not pay on time as the credit crunch gets worse, he may have to pay court costs to get them evicted and so on. These issues have meant that some landlords could no longer afford to pay their mortgages, leading to repossession of their properties. So, whilst it may be very tempting to take out a mortgage to buy a home for others to live in, there are a lot of considerations that must be taken into account. He should plan for the worst and hope for the best. Otherwise a would-be landlord could be putting a financial noose around his neck.
Brian_Krassenstein
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