The complexities of mortgages, and their criterion, are enough to put even the most patient of saints off. Sieving through endless documents searching for the answers is not exactly enthralling. So, we’ve tried to condense what we know into an easy to absorb Buy to Let mortgage blog.
Here are some Buy to Let mortgage conditions to consider:
Is a Buy to Let mortgage right for you?
On a personality level of preferences, Buy to Let mortgages are best suited to those who:
Prefer to invest in something more concrete than stock or shares, for instance.
Are prepared to accept the amount of time and energy property management can take up against the potential ROI.
Understand, and are willing to take the risks involved. It’s true, you may not earn a profit, so prepare yourself for such eventualities.
Appreciate the further risks and repercussions involved with borrowing money.
Acknowledge that property prices can go up, as well as down.
Have a willingness to potentially tie your money up for long periods of time.
What else is required from you for a Buy to Let mortgage?
There are other contributing factors to you and your own personal circumstances which may impact upon your desire to secure a Buy to Let mortgage. They are:
The size of your deposit: typically, a 25% deposit on the purchase price is required, for an easier transition. Anything less and you may see rates or offers that are simply not sufficient.
Your age: a minimum age of 25+ is a strong requirement.
Your income: a minimum income of around £25,000+ is also expected.
Your history: a thorough financial assessment and credit check will also need to be carried out.
That’s enough about you. What about the potential property, or properties, you want to invest in? Surely, you can’t just pick and choose, there must be restrictions, rules and regulations? You’d be right in thinking that. Especially as lenders like to assess whether or not the property they’re lending against is a safe bet. So here we go…
What property types are difficult to secure a Buy to Let mortgage on?
Whilst the majority of lenders will mostly make decisions based on on the location and condition of the property, other restrictions can come into play. These include:
Holiday homes: lenders will want to guarantee that the property can earn a regular income and not just through the most popular months of the year.
Ex-local authority buildings: dependent on the area, if the property is a flat and how many other privately owned flats there are in this building.
Flats above commercial premises: these can pose a number of ongoing issues or problems and are not that popular with potential renters.
High-rise flats: lenders may have concerns about how many floors there are in the flat and the facilities and amenities.
New build flats: Buy to Let mortgage lenders may require a larger deposit for any new build property.
These are typical examples of possible hurdles you may face on certain types of properties. However, that’s not to say you can't secure a Buy to Let mortgage on such properties. Speak to a broker, like MortgageKey, and borrow some of their knowledge about the best lenders to approach.
What other aspects are there to consider ahead of securing a Buy to Let mortgage?
Other key components which may affect your ability to secure a Buy to Let mortgage are as follows:
Location of residence: the majority of lenders will require that all borrowers are residing in the UK. Expats tend to struggle with obtaining a Buy to Let mortgage as an investment for whilst they’re away. It can even be an issue once they have returned too. The only lenders who approve such Buy to Let mortgages are the ones who see it as no risk.
Credit history: briefly mentioned above, a poor credit history can cause real issues for mortgage lenders. However, some are more accommodating and may approve those who have had problems in the past; it all depends on the severity of the situation and how recent it is.
Limited companies: some people opt to take their Buy to Let mortgage through a limited company to benefit from tax benefits that come with being a company director. Director’s can take dividends rather than additional gross of their personal income, keeping taxes down. However, this approach leaves the business carrying all liability. Some lenders don’t favour this because of the perceived probability of something going wrong within a business.
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THINK CAREFULLY BEFORE SECURING DEBTS AGAINST YOUR PROPERTY.
YOUR HOME MAYBE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR REPAYMENTS.
Representative APRC 3.5% Variable
Representative Example: Annual Interest rate of 2.44% fixed for 2 Years followed by 3.59% for the remaining term. Representative 3.50% APRC Variable. Based on borrowing of 150,000 over 17 years repayments of £899 per month. Total amount repayable £198,466. Includes Lender Fee of £995 and Broker Fee of £695.