Hi Vixx, I would like to invest in real estate but I don’t have enough money to buy a second property or to get a second mortgage. Is it possible to buy a second property to rent out?

Thanks, Berend

Buying real estate to rent out is a nice way to earn some extra money. It gives you the chance to enjoy the things that are important to you, now and in the future. The low interest rates and the increase in asking prices on the housing market makes this the perfect moment to go for it. 

But how can you afford that? We will tell you all about it in this blog. 

Standard mortgage vs. buy-to-let mortgage 

You can borrow money at the bank to buy a house to rent out. Which isn’t overly complicated. You will take out a buy-to-let mortgage, whose terms and conditions differ from a standard mortgage. When getting a standard mortgage from the bank, the terms and conditions will often rule out the option of renting out your property. The reason being that there are certain risks involved when renting out a propery.

You therefore need a buy-to-let mortgage. Not all banks offer this type of mortgage, however, we know the parties which do.

Borrowing capacity

When taking out a standard mortgage, your income is used to calculate how much you can borrow. A buy-to-let mortgage also takes into account the income generated from renting out the property. It could therefore be possible to get both a standard mortgage and a buy-to-let mortgage.

Higher interest rate

The bank expects you to pay the mortgage on your house at all times. After all, you want to continue living there. When buying a property to rent out, it could happen that you are unable to afford to pay the mortgage because the property is not rented out. A bank runs a higher risk of non-payment with a buy-to-let mortgage compared to a standard mortgage. That’s why the interest rate is bit higher on a buy-to-let mortgage.

The exact interest rate depends on your personal situation and the bank you decide to do business with.

Putting down a deposit

You cannot borrow 100% of the purchase price of a buy-to-let property. Depending on the bank, you will have to pay approximately 20% of the purchase price yourself. You will also need to pay property transfer tax and purchase costs. This could add up to quite a large amount.

If you don’t have this money avaialble, you could choose to use capital gain from your own property for this. You will increase the mortgage on your own property to free up money to invest in order to create a return on investment. This is a possibility for a lot of people thanks to the increase of prices on the housing market. Vixx can provide you with a made-to-measure calculation, free of charge.

This enables you to purchase a buy-to-let property without investing a lot of your own money or without having to earn a very high salary. Vixx can arrange a buy-to-let mortgage for you, increase your current mortgage and take care of everything regarding your real estate portfolio.