Investing in property is serious business and finding the right mortgage is vital. Buy to let mortgages are assessed differently and therefore getting the right advice is really important.
This type of mortgage is offered specifically to individuals who want to invest in houses rather than live in it themselves. Although similar to a standard mortgages there are some differences in criteria which Key Mortgages can take you through to avoid mistakes and hurdles along the way.
How do buy-to-let mortgages work?
The main characteristic of a buy-to-let mortgage is that borrowers will take out an interest only mortgage then pay monthly repayments over a period of time. The amount payed each month depends if you choose a fixed rate or variable rate mortgage, where the rate can change at any time decided by the lender.
What happens at the end the mortgage term?
At the end of your buy-to-let mortgage term you will need to pay the full value of your mortgage as your payments have previously only been interest based.
If you decide to sell your property at this time you might be in favour of rising house prices which will make you profit. Likewise, if house prices fall you will have to pay the remainder of your mortgage yourself.
Who can get a buy-to-let mortgage?
If you are a new landlord starting out, or looking to invest, a buy-to-let mortgage comes with a lot of features to help ease you into the property market.
Affordability assessments will be carried out by lenders which is where interest cover ratios come in (ICR) where rental income must cover the landlord’s mortgage payments, commonly 5.5%.
You must also usually need to earn £25,000 or over a year to be approved by a mortgage lender. This alongside a good credit score will make you more favourable and less of a risk to lenders.
Questions & Answers
The amount you can borrow will depend on the rental income you expect. In some cases, lenders will look at your personal income.
To be eligible for a buy to let mortgage your age and income will be considered. Most lenders will expect landlord income of at least £25,000 a year and limit ages up to 75.
At times, your property may not have tenants or rent being paid. Savings will come in useful here and we recommend you top them up when possible to cover mortgage payments and bills.