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Buy To Let

The introduction of assured shorthold tenancies in 1997, which made the rights of tenants and landlords  more equal, created the buy-to-let market that exists  today. Some say buy-to-let has forced up property  prices but there is no doubt it has a part to play as first  time buyers are getting older and younger people are  renting.

The whole point of buying-to-let is for its investment  potential – both capital growth on the value of the  property and the income it generates in rent. Buy-to-let  lending is to support investment, not home ownership.  It is important to note that lenders carry out post completion checks in relation to scheme abuse to see  who is residing at the property.

There are risks like any investment.


For example: 

  • if you are considering cancelling or surrendering any  existing investments in order to purchase a property  to let, there may be cost or tax implications. You  should seek financial advice before considering  these options 

  • there could be difficulties with tenants who breach  agreements impacting time and legal fees, as well as  income 

  • periods of rental voids if the property is not tenanted  (during redecoration or change of tenants) 

  • the higher the sum borrowed the more you are at risk  of rent not covering your loans or expenses 

  • investing in a single property can result in a lack of  diversity if you do not already have a good spread  of existing investments..


You may be better off doing  so, even if this triggers early repayment charges  payable to your existing lender, as this could still  mean a net saving to you.  

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Choosing the right property

While RDS Financial Planning doesn’t provide advice  on the suitability of investment properties, we have  included some things you should consider. 

When choosing a property to let, your main  considerations are different to those you might apply  when choosing a house in which to live.

For example, you might not choose to live in an area  heavily populated by students, but when looking for  rental potential that same area may be exactly what  you’re looking for.

Choosing the right property with the right rental yields is  important. This is true not just for your income but also  because you want the rent to more than cover the cost  of your buy-to-let mortgage.

The Association of Residential Letting Agents  ( produces a booklet giving you  tips on what to look out for when choosing a buy to let  property. Their site also has guidance and advice for both first time and experienced landlords. 

Finding the right mortgage

The buy-to-let mortgage market is a specialised one.  In April 2014 the mortgage industry implemented  the changes that came from the Financial Conduct  Authority’s (FCA) Mortgage Market Review (MMR). The  MMR changed the face of mortgage lending, forcing  lenders to pay much more attention to affordability and  expenditure rather than simply assessing gross rental  income.

Lenders view buy-to-let mortgages as higher risk than  residential mortgages because they know that many  landlords rely on rental income to make the mortgage  repayments and if the property is vacant for a period  there is no income. Because of this perceived risk,  interest rates tend to be higher than residential  mortgages. The lender will also demand a larger  deposit.

Typically in the current market you will struggle to  borrow more than 75% of the property value, and any  lender will look for rental income that covers around  125% of the mortgage repayments. A lender will  expect you to prove the rental income potential too. 

Contact us today to book a FREE Initial Consultation and we’ll answer your questions.

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