Owning a buy to let property carries risk – and as a landlord, you have responsibilities and obligations.
We subscribe to the UK Finance Mortgage Lenders’ Buy to Let Statement of Practice and this page will help you understand the risks associated with becoming a landlord and taking out a buy to let mortgage.
It will always be your responsibility to meet the costs of the mortgage. Your rental property may be repossessed if you don’t keep up repayments on your buy to let mortgage, and we may appoint a receiver of rent. Any shortfall after the property is sold would remain your responsibility.
Lenders assess whether you can afford a buy to let mortgage based on your expected monthly rent. But the actual income you make could be different due to a number of factors.
All these situations could potentially affect your income and ability to make your payments:
Increased costs – for example, an increase in letting agent fees could affect your rental income.
Interest rate rises – a rate change could increase your monthly mortgage payment. When you take out a mortgage with us, we’ll give you a detailed mortgage illustration and this will show you what effect a rate change could have on your monthly payments.
Market changes – there could be times when you need to reduce the rent, perhaps to attract tenants.
Property vacant between tenants – if the property can’t be let or you can’t find a tenant for a while, you won’t receive any rent.
Maintenance work or unexpected repair costs – your ongoing maintenance charges could increase or you could have a one-off emergency repair to pay for.
Tenants falling into arrears – rental disputes can take months to resolve and may have a serious impact on your finances. For more information on this, please see our 'If your tenants fall into arrears' section below.
In line with the terms and conditions of your mortgage, you’ll still have to cover your monthly mortgage payments – so you may want to think about putting a savings plan or other contingency in place in case there’s a shortfall.
Your regular monthly mortgage payments only cover the interest charged on the money you’ve borrowed. The original funds borrowed (the ‘capital’) remains outstanding and will need to be repaid (in full) at the end of the mortgage term assuming all interest payments are made in full and on time.
For every tenancy, you’ll need a tenancy agreement. This is a legally binding contract between you and your tenant. The most common forms of tenancy agreement are Assured Shorthold Tenancies in England and Wales, Private Tenancies in Northern Ireland and Private Residential Tenancies in Scotland. Most landlords offer a minimum contract of six months.
Both you (as landlord) and your tenant must sign the agreement. The ‘private renting’ pages at www.gov.uk/private-renting have more information.
Under the terms of the mortgage, you must have buildings insurance in place – this covers structural damage and the cost of rebuilding your property if necessary.
You can also take out insurance that covers you for tenants failing to pay their rent, as well as:
Legal cover – for potential disputes
Landlord liability – to protect you from compensation claims
Landlord contents insurance – to protect fixtures, fittings and furniture if property is furnished
Accidental damage cover – or glass and sanitary ware, ceramic hobs and underground pipes
Glass and lock replacement
Emergency cover – to insure you against call-outs for certain items, such as broken central heating, gas/electricity or burst pipes or drainage problems
Public liability cover – in case a claim is made against you
Whether the tenancy agreement comes to an end, or you want to take back possession of your property, you must give your tenants at least two months' notice to leave.
If they refuse to leave, you’ll need to start a legal process of eviction through the courts. You can’t evict them yourself and you can’t legally remove a tenant from the property without an eviction order.
If you have any queries about a dispute, take legal advice as quickly as possible.
If you have a Buy to Let mortgage with us on your rental property, and you want to live there when your tenants move out, we need to make sure you can afford the new repayments – so we’ll take you through a full mortgage application.
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