Last week we started to talk about the resurgence in the buy to let market, and the importance of understanding what you are potentially getting yourself in to if you go down this route.
This week we thought we would answer some of the questions we often get asked about this type of investment.
Who can get a buy to let mortgage?
A buy to let mortgage is not the same as a standard mortgage, as they are designed specifically for people who want to become landlords. It doesn’t matter if you have one property, or an entire portfolio, behind you – everyone has to start somewhere, after all.
However, you will more than likely struggle to find a suitable buy to let mortgage if you do not already own your own home (or at least have a mortgage in place on one).
Every lender is different, but criteria will always focus around your ability to maintain repayments. As such they will need to take in to account your current borrowings and financial obligations, including any mortgage repayments you are already committed to making.
Investing in property is risky, so it is important that you consider every potential outcome and seek suitable advice before agreeing to anything.
How do buy to let mortgages work?
A mortgage is a mortgage; however, buy to let mortgages do work slightly different to the ones you might be more familiar with taking out.
Generally speaking, because buy to let is an investment, the interest rates tend to be slightly higher as can the fees associated with it. Equally, the minimum deposit that most lenders will accept is 25% of the property value. However, as always, there are variations on this with some lenders accepting 20%, and others expecting 40%.
For the most part buy to let mortgages are interest-only, which means you won’t be paying anything off the lump sum you have borrowed with your monthly repayments, but will instead have to make a large capital repayment at the end of your term. This is where some of the risk can come in.
How much can you borrow?
The maximum amount you are able to borrow will usually be determined by the rental income you anticipate being able to command. Typically lenders will want to see your rental income being 25-30% higher than the rental income you will receive.
It is therefore important when considering a buy to let investment that you seek suitable advice from a property expert to get a good indication of what you should be able to expect for the area, and the type of property you are seeking to purchase.
Speak to an expert
While you can do a lot of research online, it is important that you speak directly to an expert to make sure that the advice you are receiving is right for you, your property and your individual circumstances. This is why Brytannic Extra Finance offer no obligation advice when you contact us so you can be assured that you are moving in the right direction.
An independent financial advisor will be able to access the whole of market to make sure that you are getting the best possible deal.