Buy-To-Let Properties

While the UK has experienced a series of ups and downs when it comes to the mortgage arena, this does not mean that all is lost when it comes to the housing market. Although the recessions hit a lot of households hard, as well as a number of businesses, there has been a recognised need for housing in all sorts of forms, and this does not look to be changing any time soon. As such, the buy-to-let property arena is something that is still very popular, and looks to offer a number of landlords different incentives that help provide housing and keep the sector alive.

One such incentive is the slashing of interest rates associated with buy to let mortgages. Not only does this allow landlords to acquire properties within a quick turnaround, but also carry out any additional work quickly, as they will have more budget to invest more in the renovation should it be required. However, like any investment, there are other factors to consider when opting for a buy-to-let property.

Ensure You Research the Market

If you are new to the world of buy-to-let, then you should ensure you do not go with the first property on offer. It's important to know the worth of a property, as well as considering other factors, such as the cost of renovation. You also need to factor in other costs, such as the payment of various insurances.

There is also the area where the property is located to consider. If your new property is in a less-than-desirable area, then it could mean that it is harder to rent. Of course, there is always risk associated with any investment, but this doesn't mean that we should not look to minimise this risk where possible. Knowing what kind of property you wish to purchase can be a good starting point in this regard.

For example, there could be other areas where your money may work in a better way for you. Or you may be able make some amendments to a larger property and convert the property into student accommodation. The possibilities are endless as long as you carry out the right kind of research.

Think About the Demographic You Want to Serve

When applying for a buy to let mortgage, it can be useful to try and ascertain what kind of tenant you wish to cater for. If you are looking to offer housing for those with a large disposable income, then you will need to ensure you have a property that is enticing and able to suit the needs of the tenant. Similarly, if you are looking to serve those who may be on benefits, then it would not be cost-effective to purchase a property which will be above the rent threshold for many claimants, as it will often become a deterrent.

Knowing what kind of tenant you are looking for allows you to carry out research in specific areas of interest, and then evaluate what properties are available. It can also be useful to find out what rent is being charged for properties similar to yours to get an idea of how much you need to borrow.

Don't Be Over Ambitious

When choosing to finance a property, it is effectively an investment that needs to make a return, or you could find that you end up spending more money than you are making, which can come with its own ramifications, especially from a financial viewpoint.

As such, you should be sure that the property you buy is one that can get a good yield on rent each year. While you may assume that there is only the mortgage itself is the only thing to worry about, there are other costs associated with the maintaining of a property, which can differ depending on the property. These costs can include boiler cover, insurance and other ongoing maintenance costs. As such, you should be looking to have a tenant present as soon as possible to ensure all costs can be covered easily, and this can be achieved by ensuring you take all factors into account.

Don't Assume Your Hometown is the Best Investment

While it can be easy to assume that the town we live is the best, it pays to be realistic before committing to buy a property. Although there may be properties nearby where we live, it could be that the better investments are further afield. Again, it is factors such as these that need to be considered before any application for a mortgage is made.

You get an idea of where popular areas are by keeping abreast of the housing market, and monitoring how long it takes for a property to become occupied.

What Aspects Will You Be Dealing With

The return on a buy-to-let property can depend on how hands-on we are. For example, finding your own tenant may be cheaper than employing the services of an estate agent. However, you may not have access to the same tools that they do when carrying out background checks, which of course can have ramifications in some instances.

There is also the maintenance of the property. Are you experienced in carrying out repairs? Or will you need to employ the services of a third party. Factors such as these need to be taken into account to give you a realistic forecast of what your monthly expenditure will be in relation to the property. As such, you will need to establish as to whether additional funds need to be set aside.

Applying for a Buy To Let Mortgage

When it comes to applying for this type of mortgage, you will find that there can be different lending criteria in some instances. However, there are a few pointers you should follow that will give you an idea of what to expect when making an application for the mortgage.

The first thing you need to consider is the risk involved. Of course, we have already discussed that this can be decreased, but the fact remains that any investment is a risk. As such, you should have a contingency plan that will detail how you avoid potential pitfalls, and how to deal with them should they arise.

It is also worth noting that those looking for a buy to let mortgage also need to have a good credit history. Generally, you should be accepted for a buy-to-let mortgage if you earn £25,000 or more, and are not stretched financially elsewhere.

Another factor to consider is that lenders generally have an upper-age limit, so this needed to be taken into account when choosing a buy-to-rent mortgage, as it could affect the length of the loan.

How Much Am I Able to Borrow?

Often, the amount given by lenders will depend on how much rental income you expect to make. Generally, those who provide buy-to-let mortgages like to see a 25 to 30% increase above the monthly mortgage payments. This goes back to the earlier point of assessing the current rate in your desired area.

What to Do If Rent Isn't Received?

There is no denying how much reward there is in being a landlord, but like any role, there are other undesirable aspects that you need to contend with. One such aspect is what you will do if the rent is not received each month. Regardless of whether you receive the rent or not, you will still need to maintain the mortgage payments, or it will be your credit file that is affected, as they will be recorded as late payments.

As such, you also need to factor in what you will use to cover these payments should such an occurrence arise. Of course, this does not mean that you're going to have nothing but constant problems when renting out your property, but factoring it in sooner rather than later means that there's less stress moving forward.

Don't Rely On the Sale of the Property to Pay the Mortgage

The reason it is important to keep on top of the rental income is because this will be your main revenue for paying the mortgage. Some may assume that if the worst-case scenario arises, then the property can be sold to cover the cost of the mortgage. However, due to the fluctuating rate of the property market, it could be that you actually end up making a loss, meaning that you have to find another means of covering the shortfall.


Becoming a landlord can be a very rewarding experience, but it can mean that a great deal of research has to be carried out prior to making an application for a buy-to-let mortgage. However, the research that needs to be carried out will ensure that we are in the best position moving forwards when it comes to making a return.

It is also important that you apply for a buy to let mortgage to earn the best yield when it comes to the rent. Purchasing a property with a view to reselling it is very different to renting it out, so the best solution needs to be applied in each instance.

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REPRESENTATIVE EXAMPLE: On a repayment mortgage of £150,000 over a term of 300 months on an initial fixed rate of 2.19% for 24 months followed by an variable rate of 4.34% over 276 months the initial monthly payment would be £653 product fee £750, val fee £455, account fee £295, the total cost of the loan would be £245,691.50 and the APRC would be 4.3%. Rates as of 12/1/2017.

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