Non Standard Mortgages - Let To Buy
Potential Pitfalls Of Let To Buy
Even if the idea is absolutely perfect for you, not all
homes are suitable for renting. The location can be wrong
for tenants, the property can be the wrong size, or the
whole idea can be financially unsustainable for some other
reason.
Furthermore, the terms of your existing mortgage may not
allow for the property to be let, certainly not without
the lender's consent. This means that you may have to remortgage
to a lender that will allow such a situation, thereby incurring
a whole new set of costs. Also, if the property is leasehold,
you may have to get consent from the freeholder before you
can let the property out, if they let you at all.
Some areas are already saturated in terms of the number
of rental properties available to let, particularly in some
parts of London. This means you face an increased risk of
longer void periods where the rental property is empty and
you are left to pick up the tab for the mortgage on two
properties.
Taking on the burden and financial risk of two mortgages
is not something that should be done lightly. This is particularly
so because lenders may be less flexible if you miss a payment
than they would be if you had a single mortgage, due to
the size of the overall debt.
You will need to be able to fund all aspects of running
a second property as you would with buy to let - insurance,
letting fees, maintenance, periodic redecoration etc. Remember
that management fees can be as high as 15 percent of your
rental income, that void periods can easily account for
two months' worth of rent each year and that income from
the rental property is subject to tax.
The Home Energy Conservation Bill 2002 is new legislation
that requires councils to set up a register of all rented
properties that are occupied by four or more tenants. The
new laws also establish new rules for fire safety, energy
efficiency and management of common areas, most of which
place additional responsibilities and costs on landlords.
