The Money Centre FAQ answers the real questions you have about the buy to let market. How do we know? It's simple: we let you ask the questions.
If there's anything you want to ask us; just email newsletter@themoneycentre.net and our advice team will be happy to help. Every month we will publish a selection of the most frequently asked questions to help build a unique customer resource.
Q: When taking out a buy to let mortgage, what costs should I consider?
A : Firstly, you need a minimum 15 per cent deposit as a down-payment for the property you're purchasing. The amount you are able to borrow depends on the mortgage deal you choose.
Valuation fee: this depends on the value of the property, but can range from £199- £850. Some lenders will only charge a flat fee no matter what the property value is. Broker fee: if you employ the services of a broker from a specialist firm such as The Money Centre, which can save you time and money by doing so.
Lender's arrangement fee: usually added to the loan and can be anything between a fixed fee of £300 and one per cent of the loan amount. Stamp duty: which is one per cent of the purchase price for properties £120,000- £250,000. If the property is worth less than £120,000, it is stamp duty exempt. Legal fees: typically in the region of £700- £800. You should also set up a 'war chest'/ contingency fund for the property while you or a property management firm finds a tenant, for potential future void periods and general maintenance costs, but if you choose a property in high demand, you may not even have to do this. As a last point, be wary of 'fee free' mortgages, the rates can be a lot higher and they may also have extended tie-in periods, with a high standard variable rate or early redemption charges.
Q : I own my home and I'm about to move because I have to relocate for work. I'd like to keep it though, maybe to move back to a few years down the line, but also as an investment. Can I change the mortgage on it to a buy to let (and take out some extra to get a deposit on my next property) and then buy a new home elsewhere?
A: Yes. Keeping your present home and letting it out would be a good idea and easy to organise. Your current lender may well offer buy to let mortgage products and may well switch it over for a small fee. They may also advance further funds as well. Even if you do this it would be wise to talk to a broker such as The Money Centre and see what other products are available, just to make sure you're getting a good deal. You need to keep in mind that the cheapest rate is not always the best deal and all your circumstances need to be taken into account. An unbiased opinion should always be taken and considered.
