Buy to Let from 3.69%

Buy to Let Mortgages: What are They?

For the most part, buy-to-let mortgages are very similar to conventional mortgages. There are, however, also several key differences that must be taken into account, including but not limited to the following:

• Buy-to-let mortgage rates are often slightly higher
• Overall borrowing costs can also be elevated
• Most lenders request a minimum 25% down payment
• Buy-to-let mortgages are often interest-only mortgages
• Additional secured loan options may be available

A “Buy to Let” is when a residential property is purchased with a view to renting it out as a form of investment. Buy to Let mortgages are specifically designed for purchasing this type of investment property. Instead of the loan amount being based on income and outgoings, a Buy to Let mortgage is based on how much rent the property can generate, it’s therefore deemed to be generating its own income to repay the mortgage.

It is, however, expected that a borrower will provide details of both income and the potential rent of the Buy to Let property, personal income of GBP £25,000 is usually required, (however certain lenders accept GBP £20,000 and some do not ask for confirmation of income).

Buy to Let Mortgages — Property Types

• Standard & non-standard properties
• HMO, student lets, Airbnb, holiday lets
• Multi-unit blocks, new builds, studio flats
• Light refurbishment, multi-let on one title

Buy to Let Mortgages — Mortgage Types

• Purchase or remortgage; capital raising allowed
• Interest only or repayment, no minimum income required
• Options for first-time landlords, limited companies, and impaired credit
• No maximum age, property count, or acreage

What are the Criteria?

Though a bigger deposit will guarantee a greater interest rate, a minimum 15% deposit is now required. One needs an 85% loan-to-value mortgage, which is smaller than the worth of the house. for instance:

• Property value: £100,000
• Minimum deposit: £15,000
• Required mortgage: £85,000

The mortgage is regarded as being at 85% Loan to Value, or LTV, since you will see above that the loan amount is 85% of the property valuation.

Lenders will demand that the rent the property generates be at least 25% greater than your monthly mortgage payback. If your mortgage payments are £800, for instance, you must charge at least £1000 rent each month. The main factor influencing the borrowed money capacity is the possible rental value.

Under the above situation, the lender is currently applying a greater interest rate than the real rate the borrower has obtained while computing 25% of the monthly mortgage repayments. This is a result of historically low mortgage rates; lenders are acting this way to guard the borrower and themselves against an expected rise in interest rates. Common rates of use among lenders are 5%. The rental income will therefore cover any possible rate rise.

Using a buy-to-let mortgage, how much can I borrow?

Many elements will affect the amount you can borrow with a buy-to-let mortgage, including the following, among others:

• The property you are purchasing has value
• Monthly rental income projection
• Your present financial situation
• Proof of work and a pay scale
• The down payment you provide’s size
• Your most current credit history

A buy-to-let lender usually expects a minimum monthly rent income of 25% to 30% higher than the mortgage payment on the house you want to buy. This guarantees a certain degree of breathing space, therefore allowing you to comfortably satisfy your long-term debt.

From where may I obtain a buy-to-let mortgage?

For most kinds of properties, most of the big banks and lenders on UK High Street provide buy-to-let mortgage solutions. However, mainstream lenders are often selective when it comes to qualified borrowers and the condition of the properties they lend on.

Along with a perfect credit history and enough proof of income, you might also have to provide documentation proving the viability and good condition of repair of the property you want to buy. Most major lenders will not provide a buy-to-let mortgage against a “fixer-upper” you are considering that requires significant repairs or improvements.

Long Term Investment Advantage

A well-used strategy for investors to increase their property portfolio is to remortgage once the Buy to Let property has increased in value. Cash is then released (see our page on Equity Release for more information) which could be used as a deposit for further Buy to Let purchases i.e.

Property valuation: £100,000

Current mortgage: £50,000

New mortgage/remortgage — £75,000 (£50,000 would be used to repay the old mortgage and £25,000 is raised to use as a deposit or deposits for future purchases)

At UK Property Finance we have been involved with Buy to Let mortgage lenders from the very beginning and have a huge amount of experience and contacts in this field.

*It is considered fraudulent to obtain a standard mortgage for a property you purchase with the intent of renting out.