Buy-to-Let (BTL) mortgages are for buyers who want to purchase a property to rent out to tenants. They are a lot like ordinary mortgages, however there are some features that show key differences.
The fees and interest rates of Buy-to-Let mortgages are usually higher. This is because they are a greater risk to lenders, as you and they are relying on a tenant to pay for the property, not just your own money which you are completely in control of.
The minimum deposit on BTL properties tend to be 25% of property value – it can vary between 20% and 40%.
Though they are available on a repayment basis, most Buy-to-Lets are interest-only. This means that instead of paying monthly repayments, you pay the original loan amount in full at the end of the mortgage term.
The maximum amount you can borrow will correspond with the amount of income you receive from your tenants rent. Lenders usually require the rental income to be around 30% higher than your mortgage payment. It is important to have an idea of how much similar properties in similar areas are rented for.
Can you get a Buy-to-Let mortgage?
Those wishing to have a Buy-to-Let mortgage have to generally meet the same guidelines as those applying for a normal mortgage. The following points are what criteria must be met in order to give you the best chance of having your application accepted by a lender.
First of all, you must really want to invest in houses/flats. Becoming a landlord can be risky so you must be able to understand and take the risks, that come with investment in property.
You will have to already own your home, not be renting, whether that be outright or through a mortgage. If you have a mortgage, you can use the rent payments from tenants to cover your monthly repayments.
You generally need a good credit score, and ideally you shouldn’t have too many other large borrowings on credit cards, etc.
Most lenders will not approve if you earn below £25,000 a year. It isn’t impossible to get a Buy-to-Let if you are on less than this, but it is highly unlikely.
Finally, you must be under a certain age before taking out the mortgage. Many lenders have completion age limits of between 70 and 75, therefore in some cases the oldest you can be to take out a mortgage with a term of 25 years is 45 years old. All lenders will differ, so it is important to ask an adviser who to apply with and which route to follow.
It is important to remember that you should plan for times when there is no rent coming in. Budget an amount from the rent when you are receiving it to put into savings so that when there are periods of time when you are without a tenant, you can still manage to afford mortgage payments. You should also bear in mind that you will have to pay for any major repair bills such as blocked drains and boiler break downs, so again having some money saved away is highly recommended.
If you are interested in buying a Buy-to-Let property, or if you would just like to find out some more about the options that are offered, call us today on 0333 320 8658, or send us an email at info@viewfinance.co.uk. One of our experienced and friendly advisors will do all they can to provide you with all the information and guidance you need!
