Unlike the mortgage which you raise when you buy your home, which is based upon your earnings, a buy-to-let mortgage is normally based on the income which can be generated from the letting of the property. There are many specialists in buy-to-let mortgages and a good broker will be aware of the prerequisites and terms which apply to them and will guide you to the right lender for your own circumstances.



The right property in the correct location is all-important. If your main aim is for growth in the value of the property then obviously you need to look at where you think the next “value-spurt" is going to be. Something like the Commonwealth games in London will pull up an area with all the developments and if you can get in early on this type of area there should be strong potential for property value growth. If income is your main aim, then University towns and cities are good hunting-grounds and you’re assured of a regular, although changing, stream of tenants, over the years.

Lenders like to see where their repayments are coming from and should be happy if you could produce some projected figures showing a gross income of around 135% of the property’s mortgage costs. This should cover the costs if things don’t go quite as smoothly as planned.

Costs over and above the mortgage repayments will include the upkeep of the property, any renovation work, furnishings if these are included in the contract and the cost of testing (for safety regulations) appliances and maintaining them. If the property is leasehold there could be ground rent and then there are possible service charges. Add to this any letting agent’s fees, typically 10% of the monthly rent and another 5% if you go for a management service. Don’t forget buildings insurance.

As far as a letting agent is concerned, they will earn their fees by searching for and vetting suitable tenants and collecting the rental. This could be valuable if you’re not renting in your own area, but is something many small landlords manage for themselves. Remember to allow for the time when there is no income from the property, between lettings, for example. At one time students use to pay rental on a per term basis, but nowadays it’s become more usual to pay for an annual occupancy.

Whilst everything goes well for the vast majority of private landlords, things can go wrong and it’s possible to find the whole project is more time consuming than you first thought. House prices have doubled in the past ten years or so, who knows how long this will continue?

In the event of bumps in the market, a landlord would still have the income from letting to cushion the blow and the property would still be there as a long term investment.

For all the advice and information that you need, the best approach is to find an on-line mortgage broker. They have access to all the latest mortgages from a range of lenders. As soon as they have your information they’ll scour the market for the best possible deal, on the most favourable terms.