When people buy a property to let, they often imagine that the rents will finance the loan – in other words, cover the monthly mortgage payments. Right or wrong? Etienne Planchard, Member of the Management Committee and Head of Loans and Credit, suggests some answers.

Will the rent cover the monthly mortgage payments?

The question of paying for itself is ongoing and very important. Rent alone cannot be relied on to service the mortgage repayment. On average, rent only covers around 60% of the total investment (based on current prices, corresponding rents, the current very low level of interest rates, a 20-year loan term and allowing for the risk of a gap between tenants).

Where could the rest of the income come from?

You need to find the remaining 40% of the investment which is not covered by the rent. How?

• Either through a capital outlay (if you have funds available)
• Or, if you are borrowing 100%, through a complementary source of income that can service the repayments on the remaining 40%.

Let's take the example of an investor who has pledged a portfolio of shares to safeguard yield while diversifying investments.

If the portfolio has been invested in a conservative profile, one could expect its income to easily cover the finance costs for the remaining 40% based on current yields (which cannot be seen as any kind of guarantee for future returns).

As every situation is different, our credit specialists analyse all the tax, asset, financial and personal aspects to ensure that the solution they offer is ideal for your individual situation.

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• our wealth planning services

Further publications about investing in property coming soon on the blog.