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.

In areas where there is low housing demand or high levels of anti-social behaviour, you may need a licence to privately rent out your property. The licence could cost you around £500 a year.

The Local Authority introduced this scheme to improve conditions and tenancy practices in the private rented sector, and to ensure a positive impact is sustained in these areas.

To find out if your area is affected and for more information please visit www.nrla.org.uk.

• Take up references from previous landlords and current employers. If you’re using a letting agent to find your tenant, they should do this for you.
• Take and hold a deposit (usually equivalent to one month’s rent). You’re legally obliged to protect this with a Tenancy Deposit Scheme (TDP).

• Custodial - a free scheme where the deposit is held in a bank account and returned at the end of the tenancy, such as the Deposit Protection Service: www.depositprotection.com
  
• Insurance - you or your letting agent holds the deposit and pays a fee to insure it.
  
  You must return the deposit to your tenant no later than 10 days after they’ve moved out, unless you’ve got a valid reason to keep all or part of it.

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, Occupation Contracts (OC) standard-contract in 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.

 

For Occupation Contracts in Wales you'll be required to issue a ‘written statement’ of the occupation contract to all contract-holders (tenants). The written statement must contain all the terms of the contract. The written statement must be issued within 14 days of occupation under the contract. The written statement can be issued in hardcopy or, if the contract-holder agrees, electronically.

• Length of tenancy and the date it started
• Details of tenants, landlord and all other parties involved
• Deposit amount and how you’ll protect it
  
• Monthly rental amount, when it’s due and how it must be paid
  
• Notice periods for both you and tenants
  
• Landlord’s and tenants’ obligations during the tenancy

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
• Boiler cover ­
• 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

Your responsibilities

You must treat your tenants/contract holders fairly and equally, and maintain the property to comply with recommended safety standards.

If your property is leasehold, you’ll need to make sure the ground rent is paid, and comply with reasonable requests from the freeholder or managing agent.

 

The following Acts give you more information about your obligations as a landlord.

 

Landlord and Tenant Act 1985

Homes (Fitness for Human Habitation) (England and Wales) Act 2018

Private Housing (Tenancies) (Scotland) Act 2016

Renting Homes (Wales) Act 2016

Renting Homes (Amendment) (Wales) Act 2021

Private Tenancies Act (Northern Ireland) 2022

The Private Tenancies (Northern Ireland) Order 2006

If the worst happens and your tenants/contract holders can’t or won’t pay their rent, it could take months to resolve via your letting agent or the legal system.

There are strict legal guidelines you have to follow if you want to remove tenants from the property. For guidance, visit www.gov.uk/private-renting-evictions.

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.

 

For Occupation Contracts in Wales different legal provisions apply to ending the agreement:

Where the contract-holder has breached the occupation contract the minimum notice period that must be given is one month. This notice period can be shorter where it relates to a breach of the anti-social behaviour or the serious rent arrears terms. Where a ‘no fault’ notice is issued, the minimum notice period that must be given is six months and a landlord cannot give such a 'no fault' notice until 6 months after the contract starts.

 

In addition, a landlord will not be able to give such a notice unless they have complied with certain obligations, including registration and licensing with Rent Smart Wales and deposit protection rules. 

 

Landlord break clauses will only be able to be incorporated into a fixed term occupation contract if the contract has a fixed term of 2 years or more. A landlord will not be able to exercise a break clause within the first 18 months of occupation.

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. 

If you’re extending your Buy to Let mortgage past your retirement age, there are some additional factors you’ll need to consider:

Retirement income

Your income is likely to be less than when you were working, and your tax status may have changed, so: 

• Will a buy to let investment still be profitable for you?
  
• Could there be additional outgoings that you’ll have to pay?

Retirement planning

The value of your property could decrease over time, and this could have an impact if you’re planning to sell the property. Your rental income could also go down.

• What would this mean if you were dependent on it for your retirement income?
  
• Do you have other sources of income, for example, private pensions or savings that could supplement this potential shortfall?

 

The older we get, the more likely we are to suffer from ill-health.

• Will you be able to physically maintain a property – and manage the tenants?
  
• Who could manage the property for you if you weren’t able to?

A buy to let investment is an asset that should be taken into account when planning your estate. We always recommend that you talk to a legal advisor.

• There may be inheritance tax implications associated with your property
  
• You may need to make a will or update your existing will. 

England Government - www.gov.uk/renting-out-a-property

Scotland Government - www.mygov.scot/renting-your-property-out

Wales Government - www.gov.wales/landlords-letting-agents

National Residential Landlords Association (NRLA) -  www.nrla.org.uk

Propertymark - www.propertymark.co.uk