Once you have made all the initial decisions when embarking on a buy to let mortgage, it is easy to get carried away, especially if you find the perfect property to let out to tenants. It is important, however, to make sure that everything will add up, so that your investment turns out to be a lucrative one. Here are a few tips to help make sure your property investment really does bring in a profit.

Investing wisely in property

A buy to let mortgage can be a great way to make extra income, and purchase another property alongside your own home, as effectively, your tenants pay your mortgage for you. However, it is essential that you work out the true value of the income you will make from rent. It is a good idea at this point to do some research; estate agents may give you an estimate of rental income that is unrealistically high, so ask around and look online to find out what the real rental incomes are in the area of your property. Once you know the most likely rental value, you can compare it to how much you will have to pay in monthly mortgage payments, and if the former is less than the latter, you will be making a profit.

As well as covering your monthly buy to let mortgage payments, your rental income should also be high enough to protect you in case of unexpected expenses. These can include void periods, for which your buy to let mortgage lender can provide you with information about insurance, or sharp rises in your mortgage interest rates, which can happen if you do not have a fixed rate mortgage.

Available mortgages deals too need to figure in your calculations. Shopping around for different buy to let mortgage deals could help you to save a lot of money. In order to check you are getting the best buy to let mortgage quote, you can use online mortgage comparison sites, or an independent mortgage broker or financial advisor. Keep in mind when comparing buy to let mortgages the various tax advantages of different products. Mortgage interest repayments can be claimed as an expense against rental income, so check to see how well your mortgage performs in terms of tax, and how this could save you money in the long run.

When choosing your buy to let mortgage, remember that you have to option of a repayment mortgage or an interest-only product. Many people choose interest-only mortgages believing that their rental profits will be enough to cover the payment of the capital amount at the end of the period, and so if this is your plan, you need to work out what profits you will make by the end of the mortgage term.

Finally, remember to check the small print. If you think you may want to move your buy to let mortgage to another lender in the future, it is a good idea to check if there are any redemption fees to pay in order to be released from your mortgage and if you will be able to afford them.

This entry was posted on Friday, October 24th, 2008 at 3:31 pm and is filed under Property Investment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.