Buy To Let Mortgages – Ultimate Guide to BTL Mortgage
Buying a rental property can sound like a perfect way to make secure investment and potential income after retirement. Although this can often be the case, there are still major dangers involved that you should take care of. If you are considering buy to let mortgages, it is crucial that you realise the distinction between a BTL mortgage and a residential mortgage and the different types of mortgages available to you.
Having all the details at your hands is one way to make a secure decision. That’s why Mountview Financial Solutions has built a buy to let mortgage (BTL) buying guide on BTL mortgages to make the right decision for you.
What is a buy-to-let mortgage?
A buy-to-let mortgage is a type of mortgage where the client buys property as an investment rather than as a place to live. There are many lenders now who offer BTL mortgages in comparison to before and there are many competitive products available in comparison to a few years back. To make sure that you select the right lender and get the most suitable product, it is important to take professional advice and Mountview Financial Solutions are a professional BTL mortgage advisor in Purfleet, Essex.
Who are buy-to-let mortgages for?
Buy-to-let mortgage is most robust for both experienced buyers and novice landlords willing to take their first move in the property investments for rental purposes. BTL mortgages require more initial fund than traditional mortgages and require deposits of between 20% and 40% depending upon the lender. BTL mortgages are most suitable for first time landlord or portfolio landlords.
Also Read: Understanding Remortgaging with Precision
How does a buy-to-let mortgage work?
Depending upon clients and lenders, Buy to Let mortgages can be taken on repayment or interest only basis. The mortgage amount offered mainly depends upon the achieved rental income or potential rental income of the property confirmed by the lender’s valuer. Most of the lenders look for a minimum of 25% deposit while some lenders also offer a mortgage with 20% deposit subject to rental income achieved by property or potential rental income (subject to lender’s terms and conditions).
Types of Buy to Let Mortgages:
Buy to let mortgage offers vary depending on which lender you are going with. Interest rates will all depend on the amount of money you borrow and the percentage of deposit you are putting in to buy the property. It will also be influenced by the form of purchase to make the mortgage you choose:
#1 – Tracker BTL Mortgage:
If you opt for a tracker mortgage, your monthly repayments are subject to adjustment on a monthly basis, based on the interest rate. This is fantastic news if the premiums go down, but not so good if they go up drastically.
#2 – Discounted Variable Mortgage:
A discounted variable mortgage is a mortgage arrangement with an interest rate set at certain percentage below the SVR (standard variable rate). This offers usually last for two years. The premium is also subject to adjustment based on the SVR, but the discount will remain in effect for the accepted period.
#3 – Fixed Rate Mortgage:
A fixed-rate mortgage will keep your payments low and durable for two to ten years depending upon the lender. Different mortgage providers are offering different deals, so it is worth shopping around. It is important to know what the rate is going to be at the end of the fixed period.
How Much Can I Borrow?
Most of the lenders offer BTL mortgage from 60% Loan to Value (LTV) to 75% LTV depending upon rental income achieved by purchased property. There are some lenders who also offer 80% LTV subject to rental income achieved by purchased property and interest rates are generally higher due to risk involved.
The sum you can borrow depends on how much rent you can actually receive from your house. Many lenders would usually expect you to earn 125 % of your monthly rental income interest charges, but may often be as high as much as 145%.
Plan for all Circumstances:
As you know, applying for a mortgage is not a decision to be made lightly, as the obligation is a long-term investment. It is a smart thing to have a contingency in place for various eventualities to ensure your financial stability.
For example, it is not rare for a rented property to have an empty time in which no rent comes in. Or at some moment or another, a pipe might break, or a roof might need to be fixed urgently. As a responsible landlord, you need to be able to make successful and timely fixes.
It is vital to make a savings plan to protect yourself from this burden. Ensure that you have relevant insurance in place and you have enough savings for emergency works at the property. It is important to consider all these possibilities before you make an offer to a house.
Protect Your Buy to Let Investment:
One way to better ensure the protection of your interest in property is to ensure that you meet all of your responsibilities and regulations as a landlord.
Mountview FS can advice on Landlord Insurance and can also provide you with brief information about lenders terms and conditions being BTL property owners. For more information, you can call us @ 02080950120 or send us your requirements on email@example.com!