Over the years, buy-to-let mortgages have become increasingly popular among investors in the UK. With changes in stamp duty, the Renters’ Rights Bill and mortgage rates combined with increasing affordability checks from big-name banks, investors are left wondering: Are buy-to-let the mortgages worth the investment?

A buy-to-let is specifically for those who are buying a property as an investment, as opposed to somewhere they want to live themselves. It allows your clients to purchase a property with the intention of renting out to tenants. Whilst buy-to-let mortgages offer many advantages, they also come with drawbacks. Read on as we explore the impact of buy-to-lets for investors.

What are the pros of buy-to-let mortgages?

Capital Growth

Typically, properties tend to appreciate in value, more so in desirable locations. A buy-to-let property allows your clients to build equity, and potentially sell the property at a higher price in the future providing substantial returns on the initial investment.

Generate Income

The rental market is currently very strong with demand at a high. With the lack of affordable housing and stricter mortgage criteria, people look to rent as an alternative. For landlords, renting a property is a great way of generating additional income.

Portfolio Diversification

Investing in properties is a great way of diversifying savings and investments. Different to the usual investments e.g. stocks and bonds, properties offer an alternate asset class to your clients which may perform well when others aren’t. This helps with risk reduction.

Flexibility

Limited company buy-to-lets have seen a shift in ownership type, due to recent tax changes. Specialist lenders are now offering more products for limited companies when combined with the options for personal ownership, providing greater flexibility for portfolio expansion.

What are the cons of buy-to-let mortgages?

Regulation & Legislation Changes

Changes in eviction processes, rental property standards and tax regulations e.g. income tax can affect profitability and increase compliance costs. Hefty fines can be imposed if legal responsibilities are not met, so it’s crucial your clients with a buy-to-let mortgage adapt to regular change.

Management Responsibilities

Property maintenance, finding tenants, dealing with legal requirements and managing ongoing landlord relationships all come with a chunk of responsibility. To successfully manage a rental property landlords must have time, effort and expertise on their hands.

Financial Risk

Your clients may have to subsidise the property if the rental income doesn’t cover mortgage payments and other expenses e.g. maintenance costs. As well as this, they can experience rental voids and non-payment of rent. Budgeting correctly will help in managing financial risks.

Interest Rate Rises

Rates can go up and down, and whilst an interest rate can be fixed for a certain period of time, it is inevitable that this will fluctuate during the lifetime of a buy-to-let mortgage. If interest rates increase, so will the mortgage payments, but this doesn’t mean landlords can up the rent.

Securing finance for your landlord clients

With ever changing interest rates and other external factors in the market, it’s important to view a buy-to-let investment from a balanced perspective. Whilst there are several cons associated with this mortgage type; the advantages pose great opportunities for landlords.

At Crystal, we specialise in finding solutions where others don’t. We can offer standard buy-to-let mortgages through to new builds, HMOs, multi-lets, student lets, large blocks and mixed portfolios. Our extensive panel of lenders will also consider anything complex!

Call our New Business Advisers today on 01827 337710 or enquire through our CrystalHUB. Let us find the perfect mortgage match for your buy-to-let clients.

Click here to find out more about buy-to-let mortgages.