Then again – while it isn't illegal for you to move in – if it is a condition of your buy-to-let mortgage that it is let to tenants and not lived in by you, your lender could be within its rights to ask you to repay your mortgage.
Technically, in the UK, you can have as many residential mortgages as you like, but lenders are wary of people using them to buy properties they then rent out. Therefore, lenders often only allow a maximum of 2 residential mortgages – one for your main residence and one for a holiday home or a family member to live in.
To finance a rental property, an FHA mortgage may be the perfect “starter kit” for first-time investors. But there's a catch. To qualify for the generous rates and terms of an FHA mortgage, you must buy a property of 2-4 units and occupy a unit in the building. Then the property qualifies as “owner occupied.”
Buy to let landlords often wonder if paying their mortgage off early is a good investment. The answer is it depends on the borrower. Paying down a buy to let mortgage will increase profits and leave the property owner with more income tax to pay.
The income you receive as rent is taxable. You need to declare any rent you receive as part of your Self Assessment tax return. The tax on your income is then charged in accordance with your income tax banding (20% for basic rate taxpayers, 40% for higher rate, and 45% for additional rate).
As an investment buy-to-let has much to offer: a regular source of income, plus a potential long-term yield from any increase in the property's value. Against that, it is a high-maintenance investment, and your asset is locked away for a long time and hard to get at (i.e. it's not 'liquid').
It is common for investors to take out interest only loans on investment properties. This allows them to make minimum repayments on tax deductible debt, allowing them to direct more of their income to pay off the loan on their owner occupied property which is not tax deductible.
However, making overpayments on an interest-only mortgage is more flexible, because unlike with a repayment mortgage – where you HAVE to repay some the actual debt each month – making overpayments on an interest-only mortgage is optional.
If you have an Interest Only mortgage, your monthly payments have been paying the interest but have not reduced your loan balance (unless you have been making overpayments to purposely reduce the balance of your mortgage). This means that at the end of your agreed mortgage term, you need to repay your loan in full.
To apply for our Buy to Let mortgages, you'll need to meet our eligibility criteria:
- Minimum annual salary of £25,000.
- You must have owned and lived in your existing property for at least 6 months.
- The property must be in the UK.
- The maximum Loan to Value (LTV) is 75%, subject to loan amount.
Head this way instead.
- This article is part of a wider series on investing, covering all areas from stocks and shares to buy-to-let, peer-to-peer and alternative investments.
- Save a large deposit.
- Consider the costs.
- Choose the right mortgage.
- Get the right property.
- Location, location, location.
- Think about your niche.
When it comes to actually buying an investment property, it can be hard to know where to start. But a simple rule of thumb is to multiply your useable equity by four to arrive at the answer. For example, four multiplied by $100,000 means your maximum purchase price for an investment property is $400,000.
What does it mean to buy real estate with no money down?
- Make your primary residence a rental.
- Leverage other property.
- Use seller financing.
- Assume a seller's mortgage.
- Get a hard money loan.
- Partner on an investment.
