Financial Considerations

Get a Free Quote Key Financial Considerations and Implications for an Investment Mortgage
Becoming a property investor is so much more than simply selecting a property, putting the tenants in and collecting the rent every month. There is a wide range of financial implications that must be considered at every stage of the project.

Initial Financial Considerations
When deciding to invest in property, it pays dividends to think carefully about the structuring of your finance. Selecting the correct type of mortgage from the outset will save you a considerable amount of money and hassle in the long run.

For example, some mortgages will allow an investor to obtain extra cash in order to complete renovation; others will allow investors to add to their portfolio as part of the same mortgage. This is an incredibly useful service if you are looking to expand quickly, as obtaining an investment mortgage can be a time consuming part of the purchase process. By having the financing in place, you put yourself in a much stronger position to negotiate a good deal with a keen vendor and estate agents will view you as a proactive buyer, often informing you of properties before they even become widely available.

Ongoing Financial Considerations
As a property investor, you are liable for taxation on the income from the property and on the capital gains that derive from the property, when it is sold. Minimising the tax liability in both of these cases is one of the most important ongoing financial matters for an investor to consider. It is well worth seeking advice from an accountant or tax specialist, as there are certain reliefs that you might be entitled to that you may not know about without specialist assistance.

When it comes to income tax, rental income will be taxed as if it were part of your employment income. Therefore, if you are already earning £40,000 in your employment, any rental income will be added on top of this and taxed at the appropriate rate. It is possible to set certain expenses off against the rental income, such as interest paid on mortgages, agents’ fees, rental insurances and up to 10 percent off for depreciation of furniture if the property is let furnished. In order to take advantage of these reliefs, it is necessary to have kept full records, which requires regular and diligent administration.

When selling the property, you will be liable to pay capital gains on the value of the property, although there is a ‘tax free’ allowance available for every individual, which is £8,800 for the tax year 2006 to 2007. Therefore, if you own the property jointly with your spouse or other individual you will be entitled to £17,600 of tax free gain. Again, this requires advance planning and investors should seek advice BEFORE they decide to sell in order for the most tax efficient structure to be set up.

Summary
Bullet Point Multiple different financial considerations need to be taken into account in relation to property investment;
Bullet Point seeking advice from the outset can be hugely advantageous; don’t simply wait until you have a problem;
Bullet Point bear in mind that there are administrative issues which need to be taken care of on a monthly basis and not simply at the end of every tax year; and finally
Bullet Point plan ahead for any disposals.

Online Mortgage Enquiry and Quote

Online Enquiry...

If you would like to receive a quote for a mortgage from a broker please
Click here...

Mortgage Calculator

Calculate

Typical Interest Payments

First Time Buyers

2.89%

Purchased Fixed

2.89%

Discounted Rate

2.99%

Buy To Let

2.99%

Commercial

3%

 

 

Affordability Calculator

Calculate
Get a Mortgage Quote

Mortgage News Feed Mortgage News Feed

Questions & Answers

Read about general questions asked by brokers and lenders and the best ways to answer...

Mortgage Glossary

Search for terms beginning with the letter:

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z