Avoid common oversights when becoming a landlord

When choosing a buy to let mortgage, landlords often encounter several pitfalls that can have long-term financial consequences. Here are some of the common oversights landlords make and how to avoid them:

Not comparing mortgage products thoroughly

Many landlords fail to shop around and compare different mortgage products. They might go with the first offer they receive or choose a lender they’re familiar with, without considering other options that might be more cost-effective.

How to Avoid:

• Research extensively: Use comparison websites, speak to mortgage brokers, and consult with multiple lenders to get a broad view of available options.
• Consider the total cost: Look beyond the interest rate. Factor in arrangement fees, early repayment charges, and any other associated costs.
• Seek professional advice: A mortgage broker specialising in buy to let properties can help you navigate the market and find the right deal tailored to your needs.

Ignoring interest rate types and future implications

Some landlords focus solely on the initial interest rate, without considering whether a fixed rate or variable rate mortgage is more suitable for their long-term plans.

How to Avoid:

• Understand the differences: Fixed rate mortgages offer stability, as your payments won’t change for the duration of the fixed period. Variable rate mortgages might start lower but can increase if interest rates rise.
• Plan for the future: Consider how long you plan to hold the property and whether you can afford potential rate increases.
• Scenario planning: Calculate the impact of different interest rate scenarios on your cash flow to see which option is more sustainable.

Underestimating the importance of rental yield and affordability assessments

Focusing too much on the mortgage rate and not enough on the property’s rental yield. Some landlords overestimate potential rental income or underestimate running costs, leading to affordability issues.

How to Avoid:

• Calculate the true yield: Use a realistic estimate of rental income and subtract all costs, including mortgage payments, maintenance, insurance, and void periods, to determine the true rental yield.
• Understand lender criteria: Lenders often require that rental income covers a certain percentage of the mortgage payments. Ensure your property meets these criteria.
• Budget for unexpected costs: Factor in potential interest rate rises, maintenance costs, and periods where the property might be vacant.

Overlooking early repayment charges (ERC) and other penalties

Not considering the impact of early repayment charges and other penalties. If you want to sell the property or refinance before the end of the fixed-rate period, these charges can be significant.

How to Avoid:

• Check the small print: Understand the terms related to early repayment, overpayments, and exit fees before committing to a mortgage.
• Consider your exit strategy: If you think you might want to pay off the mortgage early or sell the property, opt for a mortgage with lower or no ERCs.
• Factor penalties into decisions: When calculating the total cost of a mortgage, include any potential penalties you might incur to ensure they don’t offset the benefits of the mortgage deal.

Avoiding these common oversights requires careful planning, research, and sometimes professional advice. By taking a strategic approach to selecting a buy to let mortgage, landlords can ensure their investments are financially sound and sustainable.

Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact NRLA Mortgages.

This is an advertisement only and in no way should be viewed as a personal recommendation or advice. Before a recommendation of the suitability of the product can be given, we will direct you to 3mc (UK) Limited who can provide specialist mortgage advice. As part of this they will ask questions so that they can fully understand your circumstances before giving advice.

NRLA Mortgages is a trading name of LPTE Limited which is an Introducer Appointed Representative of 3mc (UK) Limited who is Authorised and Regulated by the Financial Conduct Authority and is entered on the FS Register under reference 302992.

Please note: 3mc can advise/arrange Business Buy to Let (BBTL) and Consumer Buy to Lets (CBTL). Of the two, only Consumer Buy to Lets are regulated by the FCA.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

ANY PROPERTY USED AS SECURITY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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