Buy to Let Mortgages
What is a buy-to-let mortgage?
If you are looking to buy a property to rent out as an investment, you will need a buy-to-let mortgage. Whether you're a first-time landlord, an 'accidental' landlord, or an experienced investor there is a lot of factors to consider when selecting the right buy to let mortgage. The expert advisors will take away the stress and make sure you have the most cost-effective mortgage for your investment property.
We’ve answered the questions you might have
Can I Get a Buy To Let Mortgage?
The amount you can borrow on a buy to let mortgage is mainly based on the monthly rental you are getting or are likely to get.
How Much Can I Borrow?
The criteria with buy to let mortgages is slightly different to residential mortgages. The lender will assess how much the property could earn in rental income and take this into consideration. They typically require the rent to be 125% of the mortgage payments.
You will also need a deposit of at least 25% depending on the lender. Jordan Lynch will be able to discuss your situation fully and advise how much you can borrow and how much deposit you will need.
What Costs Are Involved?
As with buying a residential property, you will need to pay a fee to a solicitor and a surveyor when you buy a rental property.
From 1 April 2016, Stamp Duty Land Tax is charged at 3% above the current rates when you buy an additional property, which will affect many of those who are buying to let. Find out how much you will have to pay with HMRC’s stamp duty calculator.
There will also be a mortgage arrangement fee and it is worth noting that the interest rates tend to be 1% to 2% higher than with residential mortgages.
Jordan Lynch will explain all the costs, interest and fees involved with the mortgage before you go ahead with the application to help you make a decision and budget accordingly.
I’ve inherited a property with a mortgage outstanding. Do I need a buy to let mortgage?
This all depends on the terms and conditions of your current mortgage. If the property was previously a residential home, then the lender may require you to change to a buy to let mortgage. In any case, it is important that you inform the lender of the change in circumstances.
I want to rent out my own home to tenants. Do I need a buy to let mortgage?
Again, this depends on the terms and conditions of your current mortgage, so you should speak to your lender at the earliest opportunity. If you need assistance looking at the terms and conditions of your mortgage give us a call.
Do your homework
Before buying a new rental property, you should treat this as you would any important business decision and do some research. Think carefully about where to buy, who you want to rent to and what condition you want them to keep the property in. Consider the area you choose to buy in and research the local rental market to ensure there is a strong demand for your type of property and that the rent will cover your mortgage.
If you are planning to buy a property that needs a lot of improvements, make sure you can afford to pay the mortgage without a rental income for the period of time it will take to complete the work.
Other things to consider
Think about how your situation may change in the future. Perhaps you plan to move house within the next few years or will want to remortgage again. Look at the portability, flexibility and early repayment fees involved with your new mortgage to ensure you’re happy with the conditions.
Carefully consider the costs mentioned above and ensure you can afford them. If you are remortgaging to save money, it is advisable to factor in all the costs involved before deciding if it’s worth it. Jordan Lynch will provide clear details of all fees and repayments to help you with this decision.