The Advantages and Disadvantages of a Buy to Let Mortgage
3 minute read
There are some things to consider before committing to a Buy to Let Mortgage. Making a decision like that in life can be made easier when you weigh out the Pros and the Cons, and because we like to make your life easier we have highlighted these for you.
Thousands of investors see property as a viable means of increasing their returns. As with any investment there are the pros and the cons to take into consider however here are a few of the positive aspects of Buy to Let Ownership.
- Capital gain: Although the value of your property can go down as well as up, historically property in the long term has served investors well with an increase in value.
- Generate an Income: Hopefully the property will service you well during the ownership with the rent providing you and additional income. Do ensure however you factor in any ongoing costs of the property and check the rental yield for the rate of return.
- Demand: The rental market is currently very strong with demand at a high. With lack of affordable housing and stricter mortgage underwriting criteria people look to rent as an alternative.
Owning a Buy to Let Property has the potential to offer a great return and thousands of people opt to invest in property in the UK. However, as with most things in life, owning a Buy to Let Property can have its negative points. We focus on a few of these below.
- Increased Stamp duty: For many investing in a Buy to Let, the property in question will be a second property or even more if part of a portfolio. In April 2016 the Government introduced a 3% surcharge for any additional property purchase
- Rental voids: Whilst the plan is to have a tenant in the property during its ownership, it is likely that any landlord will experience a period of rental void. Ensure you factor any possible periods of this into your budget.
- Non-payment of rent: Having a rental void due to non-occupancy is a budgeting cost many will make allowances for however, arguably more difficult if the ability to deal with a problematic tenant. This can also be compounded with any legal costs that may be incurred.
- Drop in property value: Yes, sadly for some property investors they thought the only way was up, but in reality, the value of any property can also go down and may even fall below what you originally purchased it for.
- Legislation: Landlords have a legal duty and legislation can be a mine field to many being difficult to stay on top of. Ignorance however, is no excuse and hefty fines can be imposed if you do not fulfil your legal responsibilities.
We are here to answer any other questions you may have, get in touch.