The significant demand for rental property has led many people to invest in property and act as landlords. Whether you are a hands-on landlord or utilise property management services, owning and letting property provides a regular income.
Of course, to let property, you need to own property. If you’re reliant on external funding to buy a property, you need to arrange a buy-to-let mortgage and the best place to help and guide you through your options is an experienced Buy-to-let Mortgage broker’s services.
What is a buy to let mortgage?
A buy-to-let mortgage is available for people who wish to use the property as an investment opportunity and not as a place to live.
Most buy-to-let mortgages are Interest Only Mortgages. This approach allows the borrower to pay off the interest each month, usually from the rental fee accrued. This outcome hopefully leaves enough money for the borrower to profit.
At the end of the mortgage term, the capital element needs to be paid, and this usually occurs through selling the property. Many people with a buy-to-let mortgage should have a backup plan to cover the capital payment cost at the end of the mortgage term.
There are standard Buy to let mortgages where you have a single tenant or a family under one tenancy agreement, or there are other types of buy to let properties such as a House of Multiple Occupancy (HMO), where tenants typically rent a room and you have multiple tenants with multiple tenancy agreements.
What is the criteria for a buy to let mortgage?
Lenders will consider the following aspects when reviewing a buy-to-let mortgage application:
Whether the loan will be used to buy homes to let to tenants.
Whether the applicant can afford their own home and outgoings.
Whether the applicant has a good credit record although some lenders are willing to accept some bad credit being registered.
Whether the applicant is a First Time Buyer and a first time landlord as most lenders want you to be a homeowner, but more specialist lenders are more flexible with this.
Whether the rental income is sufficient to cover the mortgage payments plus any stress testing the lender may apply.
Should I buy a property in a Company name?
You can purchase a buy to let property in either your personal name or a company name, however over the years the tax implications of owning a buy to let property have changed dramatically, so before you take out a mortgage it is very important that you seek tax advice from a suitability qualified person such as a property tax adviser.
A buy to let mortgage broker can inform you of the mortgage products available to suit your needs whether you are looking at an individual or company name transaction. If you are looking for a Commercial Mortgage, a broker could help you with that also.
How much of a deposit do I need for a buy to let mortgage?
Investors should expect to require a deposit of around 25% of the property value. The deposit associated with a buy-to-let mortgage is higher than a standard mortgage.
Also, be aware of the fees associated with a buy-to-let mortgage, and the related interest rates are higher than with traditional mortgages.
Should I use a buy to let mortgage broker?
With many lenders offering buy-to-let mortgages via brokers, you enhance your chances of finding the best option for your needs.
You will reduce time and boost your chances of finding the most suitable mortgage by enlisting a specialist’s services in this field. Given the unique criteria compared to traditional mortgages and the importance of following regulations when letting property, it makes sense to call on a buy-to-let mortgage broker’s services.
How to explore your mortgage options with The Money Hub
Call The Money Hub Limited on 0203 725 5830 and speak to one of our Buy to Let consultants to discuss your options or you can complete an enquiry form which will allow you to schedule a call time.
DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.
There are more specialist lenders that offer their products through mortgage brokers who accept clients that have had previous bad credit registered such as missed payments, defaults, county court judgements and a low credit score.