Buy to Let Costs - Considering affordability

A buy to let property investment can provide you with an income. But you’ll need to consider the costs involved with your buy to let property, and how these costs might impact on your overall profitability.

There are several buy to let costs. Some of the costs associated with your buy to let need to be paid upfront. However, other costs will be ongoing. Some costs can be offset against your rental income. Therefore, we highly recommend that you seek out professional financial and legal advice before buying a buy to let property.

Buy to Let Costs include:

  1. Mortgage Costs
  2. Insurance
  3. Letting Agent Fees
  4. Tax
  5. Maintenance & Repairs

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Buy to Let Mortgage Costs

Most buy to let mortgages require a 25% deposit. However, we will advise you in this respect. In addition to a deposit of 25%, you’ll usually need to pay a mortgage  arrangement fee. Furthermore, buy to let mortgage fees can be high. These fees can normally be paid or added to your mortgage. We don’t charge you any fees for arranging your buy to let mortgage, because we’re a fees free mortgage broker.

Equally, there’s the ongoing monthly cost of your buy to let mortgage, your monthly repayments. We suggest you take in to account what are known as rental voids. It’s a good idea to put a plan together about how you’ll keep up your repayments, should you go through periods when your property isn’t rented.

There are also those fees you experienced when buying your home. For example:

  1. Legal Fees
  2. Mortgage Valuations
  3. Stamp Duty Land Tax

Buy to Let Insurance Costs

Just like with every property you own, it’s prudent to consider insurance. You’ll need to have buildings insurance, particularly if you have a buy to let mortgage. In addition, if you plan on having a furnished property let, you should consider taking out contents’ insurance.

We think it’s a good idea to consider covering yourself against other risks such as:

  1. Landlord’s Liability
  2. Rental Guarantee 
  3. Emergency Repair Assistance

Buy to Let Rental Agent Fees

Where you’re thinking of using a letting agent to manage your buy to let property, you’ll need to take account of these costs as well. The cost of a managing agent for your buy to let will depend on the level of service you expect to receive. Costs can range from as low as 5% and increase to over 15% of your rental income.

Buy to Let Taxation

When you start to rent your property out we recommend that you advise HM Revenue and Customs. You’ll need to tell them about your rental income each year. You may have to pay tax on any profits you make from renting property. You may be permitted to deduct certain expenses from your profits. There has been considerable change in this area, so always consult a professional. We recommend you take specialist tax advice where possible.

Buy to Let Maintenance

As the owner of a buy to let property you’re legally responsible to keep your property in a good condition. You’ll need to budget for ongoing maintenance and repairs rather than wait for an unexpected and potentially large bill to land on your door-step.

More Buy to Let Information

The level of success you can achieve with buying to let will depend a great deal on making sure you choose the right property. This may sound obvious, but many ambitious landlords don’t spend enough time thinking about what buy to let property will best suit their plans…. read more

Buy to Let mortgage rates are the type of interest rate that you might pay on your on your buy to let mortgage. The rate you pay will depend on the total amount you want to borrow and your general financial situation. Your interest rate will also depend on how much rental income you expect to receive and the type of buy to let mortgage you choose to take… read more

It can be important to understand how buy to let property yields work. Typically, as a landlord, you’ll be looking to work out your buy to let property expected return. There are two key things you’ll need to consider… read more

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