If you have a pot of money you’re looking to invest, you may well be considering becoming a landlord.
Renting out a property is an excellent way to secure a steady income each month. Property is a safe bet for investors, meaning your capital won’t be at risk. Moreover, with the right approach and management, renting out a property is much more simple than you might think.
Before you take the plunge, you might be wondering what factors first-time income property buyers need to bear in mind. We’ve put together an in-depth list of all the financial, legal and practical concerns you should consider before purchasing your first buy-to-let home.
Buy-to-Let Mortgages Are More Expensive
While rental properties can give you a great return on investment, there are some expenses to take into account. One of the biggest considerations for first-timers is the heightened cost of buy-to-let (BTL) mortgages.
Firstly, these loans require a bigger deposit. According to MoneySuperMarket, BTL mortgage lenders typically ask for a deposit of between 25% and 40%.
Secondly, first-time buyers should be aware that BTL loans are frequently offered on an interest-only basis.
There are pros and cons to interest-only mortgages. They allow you to reap a much higher monthly profit on your investment property, but it does mean that you have to save up to pay off the capital at the end of your fixed-term loan.