Let Your Mortgage Earn You Money

House prices have gone through a period of wild fluctuation recently, with the result that many people are wary of buying or selling property. Because of reluctance, or financial inability, to take out a mortgage on a new property, the rental market has soared.

Renting a property is the preferred method for many to have a roof over their heads and because of this, more and more buy-to-let mortgages are being taken out by those willing to invest in a growing concern. Provided you pick your area and do your sums and research first, becoming a landlord can be a wise investment.

The first thing you need to do when considering a buy-to-let mortgage is to do your homework on the type of mortgage available to landlords. A BTL mortgage typically works out as 85% of the property value, and most lenders will also take into account the amount of rent you could earn. Therefore, you need to know your market to determine the level of rent you could charge.

Decide on an area to purchase your property. This will go hand in hand with the types of tenants you will attract. Somewhere close to shops, schools and quiet roads will be ideal for young families, whereas a townhouse in a bustling city close to take-aways and nightclubs will more than likely attract young professionals who like to 'cut loose' at the weekends. You may also want to consider buying in a university town – student housing can be very lucrative.

Take a look at house prices in your chosen area and if possible, speak to existing landlords about what rent they charge. Generally your rental income should cover 125% of the mortgage cost, to allow for potential empty periods between tenants. Remember you will be taxed on your rental income so don't be tempted to over-charge – this will also put potential tenants off.

Decide whether or not to employ an agent to find and screen your potential tenants, and also collect the rent each week or month. If you are buying a property in your home town you may not need this, but if you decide to purchase out of your area you may prefer to have a liaison between you and your tenants. An agent can also be useful for contacts in case repairs are needed; as a landlord you are responsible for all but the most minor repairs.

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Don't just walk into your bank and ask for a BTL mortgage. The majority of mortgages with the best deals can be found by comparing rates on the internet. As with all other mortgages, exercise caution and do the math before signing. Ensure the rent you charge is fair, affordable and enough to cover your costs.

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