What is a Buy to Let mortgage?
A buy to let mortgage is where a customer borrows money to buy a property to rent out and generate income. Lots of lenders offer buy to let mortgages and it can be a good investment. Buy to let mortgages typically have a higher rate than a traditional mortgages as they are considers to carry more risk. You can however get some great rates when you compare the whole of the market.
Buy to let mortgage affordability
Making sure that customers can afford their mortgage is of the upmost importance to potential lenders, they want to ensure that they will get there money back plus the interest. Lenders don’t want to have to reposes properties to recoup their money. Each lenders has different criteria for lending for buy to let mortgages. Some want to see a personal income over £25,000 and some will be happy if the rent payments will cover the mortgage repayments by 125%.
Buy to let mortgage deposit
When taking out a buy to let mortgages lenders will need a higher deposit than a typical residential mortgage, this is due to the added risk of these kinds of mortgages. You can expect to need at least 25% of the property value to but done. Higher deposits will help to get even better rates which will allow you to pay less interest and make more profit on your buy to let. Some lenders will allow you to use any existing equity in other property as your deposit.
Maximum Loan to Value on buy to let property
In the buy to let market we are still seeing a maximum loan to value of 80% but more typically 75%. This means that you will require at least a deposit of 20% to secure a buy to let mortgage. Some lenders will allow you to use the equity from existing property to secure your mortgage. To get more information on what you can do with your buy to let mortgage it is a good idea to speak with a specialist broker who will be able to assess your circumstances and find you the best way to get your buy to let mortgage.
Whats the maximum amount you can borrow on a buy to let?
In general the maximum you will be able to borrow is 4 x your salary. Some lenders will not take your personal income into account and will use the amount of rent to work out how much you will be able to borrow. To get an exact amount it is a good idea to speak to one of our specialist buy to let brokers who will be able to take your exact circumstances into account and give you exact information.
Buy to let mortgages for first time buyers
Most high street lenders do not like lending to customers that don’t already own there own home, there are however lenders out there who consider buy to let mortgages for first time buyers provided there is a good level of income to take into account.
Buy to let mortgage fees
Fees and rates tend to vary quite a bit from lender to lender. Generally they are slightly higher than that of a residential mortgage. It is a good idea to speak with a specialist that will compare the whole of the market and work out the best deal for you. Some will come with a fee of £299 with a slightly lower rate. Some will come with no product fee but a slightly higher rate. Your broker will be able to work out which one will be the most cost effective in the long run to help you make the best return on your investment.
Buy to let mortgage rates
Mortgage rates for buy to let properties will work the same way as a residential mortgage. There will be an initial tie in period from 1 year to the life time of the loan. Once the initial rate is over you will move onto the standard variable rate. Depending on the term and what is available on the market once your initial rate is over you can remortgage to continue getting the best discounted rates which will help to maintain your return on investment. Again like residential mortgages there are different products available; fixed rate, tracker, capped or discount rate. Speak with one of our specialists and get tailored advice on what will be best for your needs.