Buy to Let First Time Landlord
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Buy to Let First Time LandlordJames Bull talks about Buy to Let mortgages for First Time Landlords.
What are the requirements for a First Time Landlord to secure a Buy to Let mortgage?
There are actually many factors involved, and criteria does vary from lender to lender. There are probably too many to list one by one in a podcast.
But as whole of market mortgage brokers, we take details of a client’s circumstances as part of our fact finding process. Then, on that basis, we’ll recommend the right lender and the mortgage product for your individual situation.
How much deposit is usually required for a Buy to Let mortgage?
The minimum is usually 25% deposit, although there might be the odd lender doing less than that, with 15% to 20% deals.
Ultimately, the deposit can also be led by the rental income that a property will achieve. If the rental income isn’t high enough to support the amount of mortgage required, you might sometimes need more than a 25% deposit.
Are there any specific mortgage options for First Time Landlords?
Lenders all have basic criteria around the clients they will and won’t accept. I wouldn’t say there are specific mortgage options.
But it’s perfectly normal for some lenders to accept a particular client that others won’t. As mortgage brokers we obviously do our research and make sure we recommend the right lender.
How do lenders assess the affordability of a Buy to Let mortgage for a First Time Landlord?
Lenders use a mathematical formula called rental coverage. It checks if the amount of rent that a property achieves will be high enough to support the mortgage required.
On top of that, some lenders have additional criteria. For example, a client might need to receive a minimum income from their employment to be accepted.
What are the common mistakes made by First Time Landlords when applying for a Buy to Let mortgage?
The main mistake is trying to do this yourself and not using a mortgage broker like ourselves. It’s a schoolboy error!
Are there any tax implications that First Time Landlords need to be aware of?
We don’t give tax advice as mortgage brokers, but just generically, property rental income does need to be declared to HMRC.
When you sell a Buy to Let property there might also be Capital Gains Tax to pay. As we always tell our clients, if you have any questions around tax, you really need to talk to an accountant for advice.
What are the factors that determine the interest rate for a Buy to Let mortgage?
The main thing is that interest rates vary all the time anyway, depending on market conditions, and Buy to Let mortgages are no different in that aspect.
As mortgage brokers working across the whole of the market, we take the lenders’ criteria into consideration. We explore the interest rates and then we’ll recommend the right deal for a client.
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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.
What is the difference between a fixed rate and a variable rate Buy to Let mortgage for a First Time landlord?
A fixed rate mortgage is where the interest rate on your mortgage is set for a certain period of time, usually two or five years.
On Buy to Let mortgages in particular, a lot of lenders will lend more if you take the mortgage on a five year fixed rate. That obviously helps affordability.
A variable rate mortgage usually follows an index such as the Bank of England base rate. The interest rate and payments can go up and down and in line with that.
What is the typical loan term for a Buy to Let mortgage for First Time Landlords?
On all mortgages, not just Buy to Let mortgages, there’s no such thing as typical any more. On Buy to Let mortgages, however, lender criteria is much less strict.
For example, there are some products with no maximum age, which can be beneficial for older applicants as it means they can take the mortgage out over more years.
What type of property is the best investment for a First Time Landlord?
We really just give advice on getting the best mortgage – we don’t usually advise or help clients find particular properties.
What we would suggest to anyone asking that question is to speak to a local estate agent. They’ll be able to advise you about local market conditions and if there’s any particular properties of interest that they might have.
How can a mortgage broker help First Time Landlords?
As mortgage brokers we help First Time Landlords all the time. It might be daunting for people thinking about getting into property, but this is our bread and butter – we deal with it every day.
We take details of a client’s circumstances and then we’ll just recommend the right mortgage on that basis. We help by guiding you through the process. We find a lender where you’ll be accepted and we secure the most competitive interest rate available to you.
Your home 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.