What is a Buy to Let mortgage?
A Buy to Let mortgage is designed for borrowers who would like to rent out a new or existing property to a third party. They can be used to purchase or remortgage a Buy to Let property, or for additional borrowing.
Trends in the Buy to Let mortgage market
The Buy to Let mortgage market has undergone continuous change in recent years. There have been a lot of regulatory changes as result of the MMR (Mortgage Market Review) in 2014 and more recently changes to Stamp Duty and tax rules for Buy to Let investors. Despite the added complexity, investing in a Buy to Let property or portfolio of properties can still prove to be an excellent long term investment.
What you need to consider before purchasing a Buy to Let property
- Ensure you research the area you are purchasing in, for current and future demand so that you are aware of the level of rental income you will earn.
- Some types of tenants will be more favourable with lenders than others. Most lenders require you to have at least a 6 month AST (Assured Shorthold Tenancy) in place with your tenants. It may be more complicated if you choose to let to students, DSS (Department of Social Security) tenants, or if you have less regular tenancy periods, such as short term and holiday lets.
- The condition and type of property must also be taken into account.
Deposit and rental income
The deposit required for the purchase of a Buy to Let property is often higher than that required for a residential mortgage, as a result of stricter lender affordability criteria. This said, as a broker with unlimited access to the market, Large Mortgage Loans has access to a range of competitive deals, from fixed rate and variable rate options, up to 85% LTV (Loan to Value).
The rental income you earn from the property relative to the monthly mortgage payments (the rental calculation) will also have an impact on the range of products available to you. Lenders assess these factors on a range of criteria, so finding the right lender could have a considerable impact on your property investments.
It is important to remember that you will still be responsible for maintaining the Buy to Let mortgage repayments if the property is vacant, so make sure provisions are in place, should this occur.
How can we help you?
It pays to seek professional advice to help you navigate the ever-increasing complexity of the Buy to Let mortgage market. Speaking with one of our highly experienced specialist independent brokers could help you make more out of your investment.
There are a range of options that it may be worthwhile considering to help you secure the borrowing you want. You may be able to release equity from an existing property. Alternatively, a cross charge against another property may be possible in some instances as an additional form of security.
Seeking advice will also help you to find the most suitable repayment plan for you; whether you choose to repay the interest with an interest-only mortgage or make full repayments with a capital repayment mortgage.
If you are arranging your first Buy to Let mortgage or you are an experienced landlord, we may be able to help you arrange a mortgage tailored specifically to your needs, via our extensive network of banks and private lenders.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
The Financial Conduct Authority does not regulate some aspects of Buy to Let mortgages.