There are a number of cases where students travel from their home town to a bigger city in order to have their higher education. Professionals shift to a new city because of a job change or a transfer in the job. It is not possible for everyone to buy a new house in the new location immediately. An easier way is to get a rented house to live in. This is the time when the concept of buy to let mortgages comes to picture.
Many of the people think that just buying a property and renting it off for tenants is the ultimate thing that has to be done. But in fact, buy to let mortgages is the rule that has to be followed for such conditions. If you are thinking about such a purchase, then here are a few of the important guides that you should keep in mind.
Though the terms and conditions and the differences in between residential buy and the mortgage buy is stated well when you visit a bank for such a purchase, but it is always better to know the differences in advance.
When you are going to buy a property for renting it out, the initial deposit of the property, in this case, is much higher in comparison to other residential purchases. In normal cases, about 25% of the total amount is charged for the initial deposit but in many of the cases, there are also chances that the deposit demand may rise up to about 40% or so.
Rates Of Such Properties
Similar to the higher deposits, also the rate of such properties is quite higher. It is not easy to make money conveniently out of your property. You need to pay for it in advance so that you can earn a good living out of the tenants. The rates on the mortgage properties are much higher than the rates of the residential properties.
Checking On The Rental Income
When you approach the banks for a home loan, they have a check on the income that you earn per month, the security of your job and other aspects before passing the loan. In the same way, when you are going out to buy a property to rent it, the banks have a check on your current income. The difference here is that along with the current incomes, they also have a check on the rents that they will be getting after mortgaging the property in future.
Calculations To Be Done
It is always important to make your own calculations and also to fore-think about the future risks. It may happen that your tenants may turn out to be unreliable, or suddenly the prices of the houses and rents have dropped down. You need to be prepared for such cases in order to protect your property from being repossessed.
If you are looking out for some extra income, then buy to let mortgages can be a great option for you. It is also a sort of investment that people are going for these days in place of other investment modes where the turnout results is not as profitable as in the case of the mortgages.