Buy-To-Let Mortgage Financing
First time Buy-To-Let mortgages
If you are planning to purchase a property which will be let out to tenants, you should arrange a buy-to-let mortgage, or investment mortgage. With an increasing number of people choosing to invest in property as a rewarding way to boost their finances and secure a good fund of money for their retirement, there are now a number of buy to let mortgage deals available from a range of different lenders. We have designed our service to make it easier to find the right mortgage for your specific requirements, whether that is a special offer mortgage deal, or a fixed or variable rate option.
You can trust our affiliate team to advise on the most suitable mortgage. With many lenders assessing buy-to-let mortgages based on the earning potential of a rental property, this advice can prove invaluable when you are looking to organise a mortgage.
To qualify for a buy-to-let mortgage, you will need to meet certain criteria. You will be required to place a deposit, which is often larger than the deposit required for a conventional mortgage. This figure is likely to be 15-25% of the property’s value.
In addition to this, the predicted rental income of your property must be greater than your mortgage repayments by a certain percentage to ensure that you will be able to make your repayments. Your lender will also want to establish that the property you have chosen is a sound long-term investment.
You might wish to re-mortgage buy-to-let property for a variety of reasons. The most common of those are:
Moving to a new product to reduce your cost of borrowing
Mortgage interest rates directly affect the monthly figure you pay. Many Buy-To-Let mortgage products are setup based on a special interest rate deal which is usually a fixed, discounted or tracker rate set for a period of time. However, once that initial period expires it’s likely you will move automatically onto the lenders standard variable interest rate (SVR). The lenders SVR interest rate is in the majority of cases quite a lot higher than what you were paying. Our mortgage affiliate team can monitor your Buy-to-let mortgage(s) on a periodic basis. They can make sure you get the best deals and are ready to switch mortgages when the time is right. This can help you reduce costs.
Raising additional funds from existing Buy-To-Let property
You may wish to raise money by releasing some of the equity you have in a Buy-to-let property. However, in general, the criteria used to determine eligibility have become more strict due to economic and political factors. That said, there is variation between providers in what they will lend and how they will lend it. Expert advice can help. The treatment of Buy-to-let property has also changed recently from a tax point of view which adds more complication. It is important to receive mortgage advice that draws on the whole of market and considers your options overall in the current climate.
Changing the terms of the mortgage.
Investment in Buy-To-Let property is normally recommended as a long term investment. Due to that it’s highly likely your circumstances will change or evolve over a typical mortgage period of say 25 years. Terms changes have a direct impact on the amount of interest you will pay each month and affect your total mortgage cost overall. If your circumstances have changed it’s usually a good idea to seek professional mortgage advice.
Re-mortgaging properties inside a company structure
For some investors a limited company structure may be more tax efficient for them. In this situation the range of Buy-to-let mortgage vendors who lend under those circumstances will change. Taking professional mortgage advice is recommended.
Additional Mortgages / Adding to an existing property portfolio
The criteria are similar to above in buying your first buy-to-let property. However, additional care should be taken due to the recent changes in tax relief and additional stamp duty cost. Make sure the maths still add up.
Three key things that can help maximize potential:
- Find property that will deliver above average rent for a given deposit
- Seek the lowest cost of borrowing
- Ensure your tax planning is efficient
To receive the advice that you need to select the right buy to let mortgage, contact our mortgage partners today.
The Financial Ombudsman Service (FOS) is an agency for arbitrating on unresolved complaints between regulated firms and their clients. Full details of the FOS can be found on its website at www.financial-ombudsman.org.uk.
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