Many landlords in the UK have been on the edge lately. 2023 unfortunately has been a period of uncertainty especially for many businesses. And the fallout from low income generation is a definite red flag for by-to-let (BTL) landlords who are looking to pay back their mortgages by generating income from their entrepreneur tenants. But is it all doom and gloom? In this article we examine some of the strategies that have come into play for BTL mortgages and what they can mean to you as a person paying off a mortgage.

How buy to let mortgage helps

Purchasing a property by way of mortgage and letting it out to a business venture is a good investment that can also be a good source of income, especially when you’re looking to pay back the mortgage. The rental income can prove to be the ideal income that not only helps pay off the mortgage, but also ease the pressure when managing finances on the home front.

However, the recent corporation tax increase from 19% – 25% in the UK, is turning out to be a tough deal for many. The structured tax increase applies to businesses that earn over 250,000 pounds annually. Those who show profits below 250,000 pounds continue to pay a tax rate of 19%, which is termed as SPR or Small Profits Rate.

Buy to let is seen as a good potential for generating an income and many have opted for this method of mortgage due to this. If you currently own a property and are looking to enhance your income levels by going in for another BTL, you should be aware the second property that you intend on purchasing carries an additional 3% on the total value as stamp duty tax. This tax came into play in 2016. So for example, if you purchase a property that has a value of £200,000, you are liable to pay £6,000 as tax.

With high tax payments, landlords are asking the inevitable question ‘is buy-to-let a worthwhile and profitable investment?’. The answer to this question is obviously a difficult one. After all each landlord or property investor will have their own reasons for investing and would depend on the estimated outcomes of your investment. As we all do, our future aspirations depend on the current financial solutions that are destined to ‘bear fruit’. BTL mortgages can therefore be your help line to securing a better future considering the return on investment it brings, even with external elements such as tax rates causing a slow down in the cash flow and revenue build up.

Advantages of BTL

The obvious advantage of a BTL mortgage is the ability to earn a rental. And the rental will serve you in good stead with not only helping to manage home and recurring expenses, but will also allow you to generate capital growth, meaning that your money grows along with the increasing value of your property.

BTL can also act as financial security when you are too old to do a job and have regular income like a salary. With a BTAs a side note, investing in assets such as properties will always bring you better gain for the future in the event you may want to sell off and convert your earnings to bank savings. BTL therefore has many advantages to its functionality.

If you are looking to purchase a property with a  BTL mortgage, you should speak to an expert on mortgaging. At BVS Mortgages and Financial Services, our advisers will be able to provide you with information that is current and fits your method of financial gain. After all, assuring your future is what its all about.

Conclusion

BTL is possibly the best type of mortgage if you’re willing to rent out your property and earn out of it. However, with the UK and the rest of the world facing challenging economic circumstances, many business ventures are struggling. This obviously translates to smaller revenue generation by the business which ultimately ends up where landlords are stuck not being able to pay off their mortgages. But with each landlord or property owner having their own financial pathway and strategy, difficult times are being overcome and BTL continues to be a great way to save as well as pay off a mortgage.

The advantages still overcome the difficulties faced by some when it comes to mortgaging, and this proves that BTL mortgages are a better way to make a purchase of property and make some money too. Strategies do play a pivotal role and we see many property owners making their investments work for them.

* Approved by The Openwork Partnership on 22 August 2023