What you need to know prior to entering into a buy-to-let mortgage:
- Interest rates have an immediate effect but rent can only be increased at the end of the fixed-term tenancy or in accordance with the terms of the tenancy.
- Consideration should be given to a possible loss of income, resulting either from the period between tenants or when tenants fail to pay rent or damage the property.
- Possession proceedings can be costly and length and it can be very difficult collecting rent from previous tenants.
- It may be costly bringing the property up to and maintaining it at a lettable standard under the Housing Act (2004). This sets out a Housing Health and Safety Rating System based on a Hazard Score which combines two elements:
a. The likelihood of an occurrence that could result in harm to a vulnerable age group in the next 12 months (over 60's and children); and
b. The degree of incapacity as a result.
- Even if the property is unoccupied, it will still have to be brought up to the standard required under the Housing Health and Safety Rating System.
- It is a criminal offence to fail to comply with an Improvement Notice and is subject to a fine of up to £20,000.
- It can be costly to obtain a Houses in Multiple Occupation licence. You should check with the local authority as to whether such a licence is applicable to the property you are buying.
- Buying a property and leaving it empty when letting looks too difficult is no longer an option as local authorities can now, in certain circumstances, step into the shoes of owners of unoccupied dwellings and manage them.
- Buy-to-let mortgages are often subject to tougher conditions and there is less case law to protect the buyer. Buy-to-let mortgages are also not regulated by the Financial Services Authority providing less protection than a residential mortgage. Should you have any concerns in this respect, please contact your financial adviser.
- Mortgage repossessions are highest in the buy-to-let market.
- You may wish to give consideration as to where you market your property. By advertising at schools, hospitals, etc, you are more likely to get professionals as tenants.
If you have any queries on the above, please contact our Residential Property Department on 01279 755777.