Buy to let finance – the facts

Something all property investors will want to know is how buy to let investments will affect their finances.

Here are just a few things to consider:

Buy to Let Mortgages

These are available from most high street banks and financial services provider, typically lending up to 70% of the value of the property. Just like residential mortgages, these loans are available in fixed rate or flexible options, and can be spread up to 25 years. If you require a buy to let mortgage, you should make sure the rental income you can expect to gain on the property (depending on other similar real estate in the area) is higher than the mortgage repayments.

The alternative to taking out a buy to let mortgage is to pay the full amount of the price of the property or sign up to another finance plan. By purchasing the asset outright, your entire rental income will be a profit without any of it having to go towards mortgage repayments.

Taxes

There are a number of taxes you should be aware of when purchasing a buy to let property, from stamp duty to capital gains tax.

If you’re investing in UK real estate, you’ll be subject to stamp duty levies, which vary depending on the cost of the property.

Another form of levy you can expect to pay is capital gains tax, which is owed when you sell the house or flat and you make a profit on the asset. Capital gains tax is either 18% or 28% on the profit of the transaction, but is not applicable if you make a loss on the sale.

Before you calculate the profit you will owe tax on, be sure to take off solicitors’ fees, estate agent’s fees, advertising costs and stamp duty.

There’s an annual tax-free allowance for capital gains tax of £10,600, so you are only charged on any profit that exceeds this.

As you will also be earning an income on your property, you will also be charged income tax. You will have to pay 20% on earnings up to £32,010, 40% on between £32,011 and £150,000 and 45% on more than this amount. However, it is important to note, you will be exempt from paying income levies on the first £9,440 you receive in the year 2013-14.

Buy to Let Property FAQs

Before investing in a buy to let property, it is good to have all the information so you can be 100% certain prior to committing to the investment.

Here are some answers to just a few frequently asked questions that you might find useful.

To get all the information you want before signing up to the buy to let property, you should seek expert advice. Contact organisations such as the Mortgage Advice Bureau or the Money Advice Service, where specialists can guide you towards the best choices for you, whether you’re thinking of investing in buy to let as security for your retirement income, you want high returns in the short-term, or you’re looking for steady profits for many years to come.

Ready to invest in a buy to let property?

Once you have gathered all the information you require to go ahead with a buy to let property investment, Select Property will help you find the ideal opportunity for you.

We’ve been operation since 2004 and have sold more than 7,000 properties since then, becoming the leading Dubai property expert in Europe and master sales and marketing partner to Vita Student, a luxury student accommodation brand.

Our property investment specialists are on hand to provide help and assistance in purchasing a buy to let property on our books and, when you’re ready to move on from your investment, we also offer a re-sales service to help you sell on your asset.