Buy to Let Mortgages: 7 Mistakes to Avoid

Buy to Let Mortgages

Buy to let mortgages are specific types of real estate loans reserved exclusively for investment properties intended to be rented out. Buy to let mortgages rates are generally higher compared to traditional home owners’ loans due to an increased risk of default associated with such properties.

Rental market is hotter than ever due to tough economic times, increasing divorce rates and rising number of people with bad credit who simply can not afford to buy homes. Getting a mortgage with bad credit or complete lack of is difficult for many people, creating a large market layer for individuals seeking to rent apartments or houses. Buy to let mortgages present a great opportunity to invest in an affordable real estate that later can be rented out to people for profit.

However, buy to let mortgages should be carefully thought through to avoid major mistakes that could later negate potential earning.

Please read Top 10 buy to let mortgage mistakes to avoid:

1. Not checking out at least three buy to let mortgage lenders is a mistake to avoid since you should compare interest rates and mortgage payment scenarios that will work for you and could save you a ton of money in the long run.

2. Having poor credit rating means you can only get a buy to let mortgage with significantly higher interest rates compared to individuals with good credit. Taking necessary measures on improving your credit rating is necessary before you begin applying for buy to let mortgages.

3. Not doing your math is a buy to let mortgage mistake that could cost you a lot of money. Your consolidated rent payments should return at least 125% of your buy to let mortgage costs to make it a financially worthy investment.

4. Not having enough savings reserved for unforeseen repairs or non-occupancy periods. Once you decide to invest in a buy to let mortgage, you should have enough savings to sustain potential repairs or other unplanned events that are very common in the rental business. If you are low on cash, it could force you to default on your buy to let mortgage without extra savings cushion.

5. Poor market analysis is a very common buy to let mortgages mistake to avoid. Knowing your rental market and actual target group you could be potentially renting to will dictate a type of property to invest in with buy to let mortgages. Are you planning on renting to students, young professionals or families? Each of this group possesses a unique set of needs and possibilities that will define your future property. While students want cheap no-fuss apartments, families require much more space and amenities you should be providing to be able to make your buy to let mortgages work for you.

6. Not studying current rent payments in a specific rental area should be avoided at all costs. Figuring out average rents other landlords are charging should be your starting point for any buy to let mortgages calculations.

7. Not hiring a letting agent if you are new to buy to let mortgages. A letting agent could be your great asses if you are just starting out in a landlord world. They can provide you with valuable information pertaining to optimizing your property’s rental capacity and making it more attractive for renters. They also have necessary knowledge how to pre-screen potential renters who will pay on time and maintain your property in good condition.