Buy-to-Let mortgages have become an awfully popular investment vehicle in the last decade for people looking to generate money. But are their untold benefits and no shortcomings as is promoted by some estate agents? Below you will find the general issues that you would run into when establishing your first buy-to-let mortgage, so without further ado, let’s have a look…

The Advantages – Let’s open with the funding of the mortgage, the major plus is, that distinct from a residential mortgage, a buy-to-let (BTL) mortgage is financed and accepted on the back of future rental income instead of what your private income is at present. The rent that you must charge (it will be required by the lender) will be in the zone of 125-150% of the original mortgage payment. As an example, if the monthly mortgage payment is £600, your minimum rent must be £750 a month (125%) as you can see, if planned right, the majority of that sum can be monthly profit lining your pocket. To capitalise on rental profits, if you rent different rooms out in the same property you can charge more in rent, the student market is plainly the best market for this kind of rental. It’s not only the student market which BTL landlords like to aim at but as local councils move from council housing to housing associations, the openings for landlords will soar considerably, not to mention the fact that many wannabe first time buyers are resorting to rent as they cannot manage to get on the first rung of the property ladder give plenty of options for a prospective landlords. To help keep spending low on a BTL mortgage, it is advised (and most go for) an interest only mortgage as it keeps payments less than the more customary repayment mortgage model, while at the same time contributing more flexibility in the payment structure. The closing benefit is also one established on flexibility, residential mortgages exclude renting, if you are a first time buyer who fears meeting the repayments will not be doable, it might be worth asking a mortgage adviser about taking on a BTL as it might be more affordable to rent the house you buy, use the profit to pay off more capital and continue to rent somewhere else.

The Disadvantages – There is always a drawback to many of the advantages discussed above; interest rates on BTL mortgages will be higher than on residential mortgages, not to point out that the same restrictions remain also, there is no wiggle room to be had ready available. As for funding a BTL, the starting costs will be much higher also than for a first time buyer home, to start off with there are some expenses that will always be shared, Stamp Duty, solicitors’ fees, conveyance fees et al. Where the costs start to swerve are with a BTL, you are looking at renovation costs and specialist insurance might also be needed. Some lenders might be adamant that you appoint a leasing agent to run the property (as well as have assured short hold tenancies drawn up and ready to go); the charge a letting agent will obtain will be approximately 15-20% of the monthly rent, seriously draining any possible profit you might obtain. These costs all depend on the conjecture you had enough money to get that far, the average BTL deposit rate is 25%, if you’re lucky you might be lucky enough to find a 20% deposit requirement.

The other thing to be prepared for is the average time a property is empty for a year, which stands between 4-8 weeks a year, as the landlord you must have funds in place to contain the mortgage when this occurs, some sort of emergency fund, which again will reduce any profit you were hoping to see from the rent. The final negative to be recorded is the fact that running a property and being a landlord can be an overwhelming task, if you have, or are looking at ultimately owning several BTL properties it can turn out to be a full time job. So you have to be unswerving to the venture and be geared up for the rough parts, there is no getting around the rough parts of letting out a property.

That fairly rounds up the advantages and disadvantages of a buy-to-let mortgage, the ups and down you can anticipate as the classic buy-to-let landlord. As with all things, personal situations are all poles apart so unpredicted events can turn up, a lot can also depend on the leaseholder you consent to live in the property, making the right choice on this front can make the world of difference, so pick astutely or at the very least permit the letting agent earn his fee. It’s is the letting agents job to screen prospective tenants, this can incorporate a credit check, make sure the tenant can afford the rent and oversee the drawing up of any contracts and holding the deposit. A letting agent can be expensive, but they can take a lot of hassle off your plate, it just depends if you think it’s worth the extra money or not.

Wilbur O’Chaffin works at JustMortgageAdvice.com, who specialise in first time buyer mortgages and look to find the best mortgage rates for all their customers, first time buyers or not.