Applying For A Buy To Let Mortgage

Being a landlord is easier when you make informed decisions. Knowing the local market, and how to get the best buy to let mortgage, makes your life a whole lot easier.

With a high level of demand for rental property, it is easy to see why so many people are keen to invest in property. Being a landlord isn’t easy, but it provides you with a chance to generate income. Whether you want to be a landlord as your full-time job, or you view it as a way to bring in additional income, it is important you get your finances in order.

If you intend to buy property, you need to have the money in place to purchase property. You will likely need to arrange a mortgage. If you intend to let property out, you need to apply for a buy to let mortgage.

Mortgage lenders will lend to people in the following circumstances:

  • The applicant wants to invest in flats or houses
  • The applicant indicates they know the risks of property investment, and they can manage this risk
  • The applicant already owns property, whether outright or with an outstanding mortgage
  • The applicant has a good credit record and isn’t financially stretched
  • The applicant earns more than £25,000

Is a buy to let mortgage like a standard mortgage?

Yes, but there are differences. You can expect a buy to let mortgage to have higher fees, and you’ll need to place a higher deposit on the buy to let mortgage. While some lenders ask for a 25% deposit, you may be asked to pay as much as 40% for the deposit.

The interest rate for a buy to let mortgage is traditionally higher than what you would expect from a standard mortgage. Also, the majority of buy to let mortgages are interest only mortgages. Therefore, you need to think about how you will pay off the mortgage at the end of its term.

While you should hope that the value of the house when you come to sell your home is greater than the mortgage value, you cannot rely on this to be the case. Therefore, landlords and investors are advised to put money aside or generate additional income to facilitate paying off an outstanding mortgage amount.

Hopefully you wont need to do this, and the sale of the property can pay for the outstanding mortgage, but you shouldn’t take this for granted.

How much can I borrow on a buy to let mortgage?

The amount of money you can borrow on your buy to let mortgage is liked to the expected level of rental income from the property. Lenders are looking for your rental income to be around 25% to 30% higher than what you pay in your mortgage each month.

You should consider local rental fees as a guide to what you can expect to generate as a landlord.

When you start looking for a mortgage, you should consider all your options. Speaking with a broker makes sense, but you should also review comparison websites. Given that different comparison websites provide different results, it is worth reviewing a couple. Some of these sites are tied to certain lenders, so there may be better deals with some, or some lenders may not feature on certain comparison sites.

If you are looking to enter the buy to let market, and you need assistance, contact Ariston Property and we’ll be delighted to help.