David Treharne

Could letting out your property provide the extra income you need?

Whether you are new to the buy-to-let scene or an experienced landlord, fully understanding the ins and outs of buy-to-let mortgages is essential when managing your property portfolio. Here the UK’s leading independent mortgage broker, Mortgage Advice Bureau, offers the ultimate guide to letting out your property.

There are two main ways that buy-to-let properties can make you money. Capital growth is where the value of your property increases over a period of time, and while property value can increase, it is important to remember that it can also come back down as local house prices and market conditions fluctuate. The alternative way is via rental income, which is the amount of money that you receive from your tenant.

“It is not uncommon for someone to become a landlord accidentally. You may meet a new partner and move in with them whilst keeping your own to rent. You may have to move abroad to work but want to keep your home in the UK, or you may simply have difficulty selling your property. If this is the case, there are certain steps you should take when making the decision to turn your home into an investment,” said David Treharne from Mortgage Advice Bureau.

Telling your mortgage lender about your change in circumstances may sound simple, however, many would-be landlords overlook this. Your lender needs to give you formal ‘consent to let’ before you can let out your property, which may mean a higher buy-to-let interest rate. Whether you are opting for the most common form of tenancy, Assured Shorthold Tenancies (AST), or an alternative, failing to notify your lender will put you in breach of your mortgage agreement.

Telling your insurer is also integral to your success as a landlord. Your standard Buildings and Contents insurance policy will not cover you if the property is to be let out. Instead those looking to let their property should take out specific Landlord’s Insurance.

David added: “Seeking assistance from a letting agent is advised, and an experienced agent can help you set yourself up as a landlord or manage your property for a small fee. Your agent will be able to advise on buy-to-let mortgages, which operate in a very similar way to a residential mortgages. Despite having similar rates, fees and charges, a buy-to-let mortgage does have a few key differences.”

Mortgage interest rates for these types of mortgages tend to be higher than those for residential mortgages on your home, and the loan-to-value (LTV) is generally lower. Affordability is also assessed differently; whilst employment income, benefits and a combination of other sources are used to evaluate your ability to repay the loan, income is assessed as a percentage of your mortgage payment which is usually at least 125%.

“To explain, if your mortgage payment is £700, you would need to attain rent of at least £875. It is important to note that the rental value of your property would need to be confirmed by a surveyor.”

There are also different taxes with a buy-to-let mortgage, Stamp Duty has to be paid on a purchase of any property worth more than £125,000, but you may also have to pay Income Tax on the rent you receive and Capital Gains Tax when you come to sell the property. You must state your rental income on a Self-Assessment Tax Return but you can take off costs such as mortgage interest and letting agency fees from the rent before you declare your income.

Maintenance costs, annual safety checks, Landlord’s Insurance and Rent Insurance are all costs that need to be considered, even though they may not be taken into account by the mortgage lender.

“Landlords with more than one property should also seek independent advice as some lenders will only lend on properties valued above a certain level. Although this is usually around £40-50,000, there are some that specify minimum valuations at a level of £100,000 and above. Some also restrict the number of properties you can own or the maximum amount that they will lend to you in total,” concluded David.

For further information please contact David on 07501 720320 or email davidtr@mab.org.uk. Alternatively, please visit www.dawsonsproperty.co.uk


David Parton 2

Booming property market results in period of growth and expansion for leading estate agency

Swansea’s largest independent estate agent undergoes dramatic growth and expansion and after recent success at The Lettings Agency of the Year Awards 2014 Dawsons has been looking in on itself to find those individuals who can continue this success.

One such individual is David Parton who is progressing from Office Manager to full Branch Manager. David will now be moving from Dawsons’ Mumbles branch to take on his new role at the Killay office. The new position is symptomatic of Dawsons’ progress and reliance on committed, professional staff. David’s tried and tested methods during 8 years with the Mumbles team is proof of the winning qualities needed to steer the way to future successes in the buoyant property market of recent times.

“I have gained some fantastic experience as Office Manager at our Mumbles branch as well as an extensive knowledge of the local market. I look forward to the change of area and getting my teeth into the challenges that lay ahead,’’ added David.

“I am delighted to announce the promotion of David Parton, each of which have developed within the business. Myself and the rest of the Dawsons team look forward to watching them advance further,” – Christopher Hope, Senior Partner at Dawsons.