Buy to Let Mortgages
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Buy to Let Mortgages
Sam Bull talks us through the Buy to Let mortgage process.
What is a Buy to Let mortgage and how do they work?
It’s a mortgage that allows you to buy a property to let out – it’s as simple as that. Rather than you living in the property, you’re going to be renting it out and therefore you need a special mortgage.
Who can get a Buy to Let mortgage?
It comes down to each individual’s circumstances but, generally speaking, anyone can get a Buy to Let mortgage – including First Time Buyers and homeowners.
Mortgage lenders do have certain criteria points that you may need to to hit, but generally most people can get a mortgage.
How much can you borrow on a Buy to Let mortgage? and what deposit do I need?
The borrowing calculation is the main difference between a residential mortgage, where you’re moving into that home, versus a Buy to Let mortgage. On a residential mortgage the lender will calculate the borrowing using your income. It might be four and a half times your salary, for example.
On Buy to Let mortgages the amount you can borrow is dependent on how much rent you will receive from that property. Each lender has their own rental calculations. They might want the rent to cover the mortgage payment by 145%, for example, or meet another stress interest rate.
We would do those Buy to Let mortgage calculations to look at how much you can borrow based on how much the property would rent out for.
What deposit do I need? What other costs are there?
Most mortgage lenders will require you to at least put down a 25% deposit. Other costs involved include your solicitor fees and there will also be stamp duty to pay. That could be ‘second property’ stamp duty if you’re already a homeowner.
Then there are the usual mortgage related costs. You may need to pay for a valuation of the property, and the mortgage lender might set a product fee to secure a really good interest rate.
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Everyone’s different. You might be self-employed. You might have some credit history issues – whatever your situation, we will find the most suitable product available to you from across the whole market.
Is it illegal to rent out a house without a Buy to Let mortgage? Is it illegal to live in your own Buy to Let property?
If you’ve got a residential mortgage and you wanted to rent that property out, you should speak to your existing mortgage lender and ask for ‘Consent to Let.’ The mortgage lender will hopefully give you permission to let out that property, even though you’re on a residential mortgage. If you don’t get consent to let, you would be breaking the terms and conditions of your mortgage contract.
Again, living in your own Buy to Let property would be breaking the terms and conditions of that particular mortgage. So the best thing to do is to speak to your mortgage broker if your circumstances change. Mortgage lenders are flexible, and they’re often happy to help – whatever your situation is.
Illegal is a strong word – I don’t think that you’re going to get locked up in prison. But it’s always best to do things legitimately. Mortgage lenders are fine if you have a change in circumstances. Speak to your broker – we’ll be happy to help and give you advice on what you need to do.
Should I choose interest only or repayment on a Buy to Let mortgage?
That will depend on what you’re wanting to achieve. Some of my landlords are looking to purchase Buy to Let property to get an extra income. If that’s the case it’s usually best to go for interest only.
Other landlords are looking to buy property as future investments and to grow their equity. They don’t necessarily need an extra income, they just want to pay the mortgage down as quickly as they can. They’d probably choose a repayment mortgage to achieve that.
So it depends on your circumstances. We always get to know each client and what your requirements are, to give advice on the right way for you.
How many Buy to Let properties can I own? Is there a limit?
There is no limit. You can buy as many Buy to Let properties as you want. There are extra criteria points you may need to hit for portfolio landlords, when you have lots of properties. We might look at more of a specialist mortgage, but there’s no limit in general.
What else do we need to know about Buy to Let mortgages?
The good thing about using a mortgage broker to find a Buy to Let mortgage is that we will take into consideration your own personal circumstances. We can explore the entire market to make sure that you’re getting the most suitable deal.
Your property may be repossessed if you do not keep up with your mortgage repayments.
The Financial Conduct Authority does not regulate most Buy to Let Mortgages.
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