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Buy to Let Mortgages

If you are planning to buy a property to rent out you will need a buy-to-let mortgage. As many existing landlords already know, this market has changed considerably over the last few years. However, there are still mortgages out there

Investing in a Buy To Let property has always been a sound choice. Even though the Government has reduced the tax advantages of this type of investment it still offers the opportunity for long term growth. A person may also claim all costs incurred running the property as a basic rate reduction from income tax liability.

For those looking to put together a portfolio of properties it may be worthwhile looking at setting up a Limited Company in the form of a SPV (Special Purpose Vehicle). As with all matters concerning the tax treatment of any investment, advice should be sought from an accountant or tax specialist.

So whether the choice is a single Buy To Let investment or a multiple set up, investing in property is still an excellent option for those looking for long term growth.




Buy to Let Mortgage Rates

Buy to let mortgage rates vary and are dependent on the risk of the mortgage to the lender as well as the deposit available for an individual to put down. Buy to let mortgages rates are often higher than residential rates.

With a buy-to-let loan, mortgage lenders will look at the expected rental income and some may require a minimum earned income too.

You can usually choose between a range of mortgage deals, including fixed rate and tracker loans. Arrangement fees also apply and they can be high.




Tax Advantages and Disadvantages of Buy to Let Mortgages

Tax relief on your mortgage interest payments is set at a flat rate of 20% for Buy to Let mortgages. This won't effect landlords who pay a basic rate of tax.

This means that a landlord getting £10,000 in rent and paying £9,000 in mortgage interest payments will end up paying tax on the full £10,000 - though the amount will still depend on their tax bracket.

They will then be able to deduct £1,800 from their tax bill due to the 20% tax credit, leaving them with the final overall tax bill on their rental income.

Please bear in mind when you sell a property that isn't your main residence, you may be liable to Capital Gains Tax.




Your property may be repossessed if you do not keep up repayments on your mortgage.

The Financial Conduct Authority do not regulate some types of Buy to Let Mortgages.