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    Buying a Property

    What is equity?

    Equity is the amount of the property the homeowner has paid off, against the total amount owed.

    For example:

    A property costs £230,000.

    The owner still has £100,000 left to pay on their mortgage.

    Due to the owner paying off £130,000 of their mortgage, the equity they have in the property is £130,000.

    That equates to 56.52% equity.

    Once the homeowner has paid the mortgage off, they will have 100% equity in the property.


    What does LTV mean?

    LTV is the abbreviated version of loan-to-value. When securing a mortgage, the LTV is the difference between the deposit and the loan. Generally, a high LTV would be anything from 75%-95%, whereas anything below 74% is classed as a low LTV.

    A first-time buyer may secure a high 95% loan-to-value mortgage, as they may not be able to save for a deposit. The buyer would then pay interest on the 95% loan.

    What is a cash buyer?

    A cash buyer is someone who has the money to buy their property outright, without the use of a loan or mortgage. This is often cheaper in the long term as no interest would have to be paid. However, it is much harder to save such a large sum of cash, and this is more often achieved by selling existing assets.

    Cash buyers can sometimes get a better deal when buying a property in cash, as there are fewer complications during the transaction.

    What are the different mortgage rates?

    Firstly, what is a mortgage rate? A mortgage rate is the amount of interest a buyer pays on the loan they have taken out.

    There are a variety of mortgage options available in the market to suit each individual’s needs. The different mortgage rates available are:

    Fixed-Rate: Fixed-rate mortgages are the most popular. This is when the rate is agreed upon with the lender and will be fixed for a set term, which can range from two to five years. These mortgage options are popular as they allow the homeowner to budget as payments will stay the same for a fixed period of time. Typically, buy-to-let mortgages are on a slightly higher rate than buy-to-live.

    Standard Variable: Standard variable mortgages are usually the most expensive on the market. The lender can change rates with little to no notice. This is the default mortgage option if a fixed term is not renegotiated. However, the buyer can switch to another lender or mortgage scheme with no exit fees.

    Discount Variable: A discount variable is only available for up to two years; this gives the buyer a -1% discount on their interest rates. If the interest rate is 4% the buyer will pay 3%. Once the discount period ends, the buyer will switch back to a standard variable rate.

    Tracker: A tracker mortgage usually follows the Bank of England base rate, with an additional 1.5%. Therefore, if the Bank of England base rate is 1% then the buyer will pay 2.5%. This can be cheaper than a fixed rate. However, if Bank of England rates climb to 3.5%, the buyer will pay 5% interest on their mortgage. This makes a tracker mortgage harder to budget for.

    How much is a buy-to-let deposit?

    Typically, the minimum deposit needed to secure a buy-to-let property is 25%, although this can vary from 20% to 40%.

    This represents a 75% loan-to-value mortgage, although in most cases investors will look to secure a lower loan-to-value mortgage by paying a higher deposit.

    What is property conveyancing?

    Conveyancing is the transfer of legal documents and the exchange of property from one party to another. Often, the buyer will instruct a specialist solicitor to see the exchange through to completion. While a buyer can take control of this themselves, it can become very costly if any complications arise at this stage.

    What is Stamp Duty Land Tax (SDLT)?

    Stamp Duty Land Tax is a compulsory payment when purchasing a single property. The SDLT can significantly vary depending on where the buyer is located, the price of the property, and the type of property purchased.

    To calculate the charge on your property, use the CityRise Stamp Duty Calculator.

    Property Investment Types

    What is off-plan property?

    Off-plan property is a property which has not yet completed development, such as new-builds. These typically offer investors lower entry costs with the property’s value increasing upon completion. Often, off-plan properties represent the strongest investment opportunities as they offer immediate capital appreciation.

    What is an off-market investment?

    An off-market investment is a property on sale, which is not listed on a public platform. This offers investors the opportunity to purchase something exclusive, which has not been listed on all property portals.

    What is an HMO?

    An HMO, or a House in Multiple Occupation, is a property which is rented out to at least 3 tenants at one time, who are not from one household. In HMOs, there will often be a shared kitchen, living and dining area, and shared bathrooms.

    Each tenant is under a different tenancy agreement. HMOs usually generate higher rental income as the rent is divided on a room-per-room basis. In some cases, a landlord may have to get an HMO licence, so it is best to check with the local council.

    Property Investment

    What is a rental yield?

    A rental yield is the annual rental income of a property, divided by the property’s purchase price. To get the percentage yield, multiply this figure by 100. A high rental yield will help investors to recoup their initial investment and eventually profit from their property sooner.

    Have you tried the easy-to-use CityRise Rental Yield Calculator?

    What is capital growth?

    Capital growth is the increase in property value over time. There are several factors which can influence property price growth, such as the desirability of a location and the economic growth within the city.

    For example:

    An investor purchases a property for £200,000.

    The property value appreciates by 10%.

    Therefore, the capital growth equals £20,000.

    Once the investor sells the property, the profit from the property will be the capital gain.

    What is a return on investment?

    The return on investment is the cumulative profit made from a property. This includes the total rental profit and capital gain.

    Why is property a good investment?

    Property is considered one of the most secure types of investment because it is a physical asset. When compared to stocks or cryptocurrency, it is highly unlikely for property to dramatically reduce in value. While gains can be slower, they are typically more stable and often continuously growing. In fact, average property prices have risen by around £95,000 in the last decade.

    Letting a Property

    Should a buy-to-let property be furnished or unfurnished?

    This is completely up to the investor. Furnished apartments can increase rents by up to 20% according to OnTheMarket. However, the landlord must consider the additional cost of buying and maintaining the furniture. Unfurnished apartments may not bring in as high a rental income. However, the landlord will not be liable for any damage or wear and tear to the furniture.

    Is a property management service worth it?

    Using a property management service is a great way to be a hands-off landlord. For investors looking for a hassle-free experience, their property can be maintained, tenants sourced, and payments managed. This comes at a small cost, usually a small percentage of the monthly rental income, but can save the landlord a lot of time and money in the long term. However, some landlords prefer to be hands-on and manage their own property.

    Calculate Mortgage Repayments

    Securing a mortgage is a huge financial commitment. Whether you are saving for your first investment or financial planning for your next, it is crucial that you calculate correctly. Use our mortgage calculator to help to determine what your monthly repayments will be. This way you can ensure that the rent earnt covers the repayments on your buy to let property.


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    Calculate Stamp Duty

    Use this calculator to determine the Stamp Duty Land Tax (SDLT) on your property investment. Stamp Duty is a tax paid by the buyer of a UK residential property. The stamp duty rate ranges from 2% to 12% of the purchase price. However, it can change based upon the value of the property, the purchase date, and whether you are a first-time buyer or not. Also, a 2% surcharge is added to each of these rates for buyers who are non-UK residents.


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    Rental Yield Calculator

    Discover whether a property is worth investing in. Use our Rental Yield Calculator to work out the rental yields on your investment.


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