How to get the best buy-to-let mortgages
/The market for buy-to-let mortgages has shrunk a little in recent years despite them becoming an even more attractive investment thanks to the likes of low savings rates. There has also been something of a boom in demand for rental properties in certain parts of the UK, which of course makes being a landlord a potentially lucrative position to be in.
Achieving what can be a reliable and rewarding source of income means getting the best buy-to-let mortgage deal you can find. That usually requires experience and expertise in the field, which is where professional mortgage brokers can help.
But while a broker may be needed to seek out and find the best buy-to-let mortgage deals, there is plenty to learn about before even taking that step. Here is some information and advice to help you get a few steps ahead.
Apply for the Right Kind of Mortgage
Buy-to-let mortgages are more expensive than residential mortgages, a fact that has tempted some folks to apply for the normal residential mortgage with their lower rates. However, this is considered a serious act of fraud and can land whoever commits it in serious trouble with the law.
Even if you originally purchased a property to live in and then later moved out and rented that property to a tenant, you must inform your mortgage lender of the change in circumstances. Clearly it is important to be aware of this issue to avoid falling foul of the law, as even an honest mistake can prevent someone from being able to apply for any mortgages in the future.
Be Prepared to Pay a Much Bigger Deposit
Anyone wishing to become a landlord will need to be prepared to pay a significantly higher deposit than might be expected for a residential mortgage. Buy-to-let mortgages will require at least about 25% of the overall purchase price, though many deals will require a deposit closer to 40%.
Buy-to-Let Mortgage Eligibility Criteria
The exact eligibility criteria for a buy-to-let mortgage can vary from lender to lender, but there are usually several pre-requisites that most banks and building societies will insist upon. One of the most common is the requirement for a minimum income. The amount will range between lenders, but can be as low as £25,000. There will also often be a minimum age for the applicant, usually set around 25.
There will also be restrictions placed on how many buy-to-let loans can be held at any one time by an individual. It is commonly restricted to three, which itself will be dependent on other criteria being met. Additionally, expect there to be a cap on the total amount that be borrowed over multiple loans, although this will often be set quite high.
Rental Income Requirements
The amount of rent yield expected from the buy-to-let property will also be considered by the lender before approving a loan. It will need to be at least 125% of the suggested annual mortgage payment amount. So, iif you wanted to repay the mortgage at a rate of £10,000 per year, your rental income will need to be at least £12,500. For a repayment plan of £20,000 per year, the rental income will need to be at least £25,000.
The lender will then calculate the applicant’s income and the projected rental income against the value of the property to ascertain the economic viability of the loan.
If you need a mortgage broker that will conduct extensive research across all finance options before suggesting the best buy-to-let mortgage deal for you, then contact us on 0844 855 0699 or email info@rynerandpartners.com.