Buy To Let – Questions and Answers

In the last few articles I have discussed the options for first time buyers and how they can get on to the property ladder.  Over the coming weeks I will discuss the much talked about buy-to-let market and the options you have to build your own portfolio. However, before that I am going to answer some of the questions that I have received over the last few weeks concerning this subject.

Q: I have read a number of articles recently about the buy to let market boom. As a first time investor can you please tell me the minimum deposit I would need to buy a property? - Anonymous

A: Most lenders in the market will require a minimum of 15% deposit when you are buying a buy to let property. However, new lenders have entered the market that only require that you have a 10% deposit. This does make it easier for you to purchase but at the same time you must also realise that your mortgage payment will also be higher to accommodate the lower deposit placed down. This is an important point as research of the area will determine whether the rent you achieve will cover your mortgage. If it does not then you will be out of pocket on a monthly basis. My main advice is to research the area thoroughly then talk to your mortgage broker to see if the numbers fit.

Q: I am a first time investor and I have read a lot in the press about buying property. I have noticed that many people are buying flats in London rather than houses. What type of properties do you think are best to buy? S Read – Leytonstone

A: When it comes to buying an investment property the golden rule is to do your research.  There is nothing to say that flats make a better investment than houses. These are purely based on the area they are situated. It is essential before buying any property that you talk to a number of local estate agents to find out the rental income you will achieve in the area. It is also essential to find out the demand of the type of property you are looking to buy, as you do not want to buy a property that will achieve a lot in rental income but will take six months to let out.

Q: I have a mortgage already and currently have a large amount of equity built up in this property. I would like to buy an investment property but do not have a full deposit. Is there a way I can use the value of my current house to offset the shortfall in a deposit?  A Shah – Wapping

A: With the absence of a deposit it will be difficult to purchase a buy to let property as most lenders will require a minimum of 15%. It would be worth talking to a mortgage broker about the option of releasing equity in your current property to raise a deposit for your next purchase. Once they have assessed your current situation they will be able to tell you whether it is a good idea or not.

Q: I already have three properties which I have successfully let out. I am now looking to build my portfolio further and want to buy a few more. I have the deposits available for maybe two more flats. There have been quite a few programs on the telly that suggest finding bargain properties at an auction. Can you please advise on how to get a mortgage for property from an auction?  D Roberts – South Quay

A: When you buy from an auction the procedure is usually that a 10% deposit is required on the day to exchange contracts. You then have another 28 days to complete the sale. This means that you need to have your mortgage approved before the auction date.  You also need to make sure that you hire a local surveyor to make sure that the property is suitable for mortgage purposes. Finally, you should let your solicitor know as well so that they can look at all the necessary paperwork on the day of auction.

I hope the above has been helpful and over the coming weeks I will be discussing some of the above points and the buy to let options in more detail. If you would like to ask any questions about building your own portfolio as well as some of the pitfalls to avoid then please email me at the following address: propertymart@themortgagetimes.com

James Smith is a marketing executive for Mortgage Minds.
Mortgage Minds is an independent mortgage proposition, a division of the Mortgage Times Group Limited. The Mortgage Times Group Limited are authorised and Regulated by the Financial Services Authority (303007)

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