Thinking of investing in a Buy-to-Let? Here are the answers to your Commonly Asked Questions
We put your commonly asked questions about Buy-to-Let Mortgages to the expert and these were the answers…
1. What should I look out for when choosing a Buy-to-Let mortgage?
Fees. Cheapest rate does not mean it’s the cheapest product! Some lenders will charge extortionate fees for relatively small loans so make sure you do your sums.
2. Who can get a buy-to-let mortgage?
Most lenders prefer you to be an owner-occupier but not always, we have placed mortgages for clients who live with Parents that have previously owned a property and have gone on to purchase a property to let. You can be an individual or set up a Ltd Co to purchase a Buy To Let property.
3. Do I need a Buy-to-Let mortgage to Let my property? What are the implications if I don’t have one?
If you have an existing residential mortgage on your property then you can apply for Consent to Let from your existing lender. The terms of which will vary between lenders with some allowing you to do so for a short period of time to others that will insist you convert to a traditional Buy to Let mortgage. If you are looking to realise capital in your current residential property to help you fund a future purchase however then a traditional Buy to Let mortgage will be required and you should seek professional advice on how to organise this as there’s lots of criteria to navigate which can often catch you out.
4. How do buy-to-let mortgages work?
Typically a lender will calculate the monthly interest only payment based upon a stress rate of say 5-5.50% then multiply this by 125-140%. This will give you the monthly rent that the property will need to achieve. IE £200,000 loan @ 5.50% = £917pm x 140% = £1284pm rent.
Alternatively some lenders will carry out a more comprehensive assessment of a client’s overall affordability which can work well for higher earners with relatively low levels of existing debt.
General rule in the home counties is that you will require a 25% deposit.
Rates are at an all-time low with 2 year fixed rates available at under 2% and 5 year fixed rate available at under 2.50%.
5. Are there any other important things to consider?
Rental Voids, routine maintenance, repairs and Landlords now have a responsibility to verify their tenants identity and rights to reside in the UK. Landlords also need to be aware of the recent tax changes that have now started to be phased in.
If you have any further question get in touch with our Mortgage Expert – Paul Sands (Sands Financial Management) on 01462 420234