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BUY TO LET

Buy to Let.

A Buy to Let mortgage is designed for landlords for the purpose of buying a home to rent it out. These types of mortgages operate like that of a normal mortgage with just a few key difference. The majority of lenders ask that you make a minimum of around £25,000 annually anything under this and you may find it difficult for a lender to approve your Buy-to-Let mortgage.

Mortgages.

Buy To Let Mortgages are typically very similar to that of a normal mortgage with the key differences being that there is a higher interest rate on the overall loan as well as a larger downpayment usually being required, typically being around 25% of the value of the property however a downpayment can vary from 20-40% depending on the lender.

The majority of BTL mortgages are typically interest-only meaning you pay the interest each month and not the capital amount. At the end of the mortgage term you repay the full amount of the original loan.

Capital Gains Tax.

Capital Gains Tax refers to the tax you pay on any asset you sell that makes a profit, however this is also the case for Buy to Let properties. The tax rate for a basic rate tax payer is charged at 18% where as if your a higher or additional rate tax payer the CGT is chargerd at 28%.

When it comes to selling your buy-to-let property you will typically pay CGT if you make more than you annual threshold of £12,000. Couples who jointly own assets can combine their annual threshold to £24,000 instead of just £12,000.

Additional Charges.

There are many Additional Charges when it comes to Buy to Let properties such as the inital cost of survey, solicitors fees and property insurance. On top of this you will also have to pay income tax on the money you recieve as rent. This will range from 20% to 40% depending on your income tax band.

You may be able offset your rental income against certain expenses for example Council tax, property maintenance and letting agent fees.