What is Buy to Let Mortgage and How it Is Work?
BTL mortgages are a great way to invest in real estate, and if you’re thinking of getting one or just knowing more about them, you’ve come to the right place. A Buy To Let mortgage is a home loan used to purchase property and rent it out for a profit to residential renters. In the United Kingdom, most buy to let mortgages are interest-only, with the landlord paying a monthly interest out of the rental income.
Houses, apartments, and everything in between is all offered as buy-to-let properties. Renting out a property without a BTL mortgage is usually against your lender’s guidelines when you own it completely.
Who is eligible for a buy to let mortgage?
A buy-to-let mortgage is a type of loan that new landlords and experienced property investors can use to fund the purchase of a property to rent it out.
Most lenders will require you to take out a buy-to-let mortgage if you want to get into the property rental market. Lenders will sometimes enable a residential property to be rented if the owner is having difficulty selling it.
So the risk considerations are different; most mortgage lenders separate buy-to-let mortgages from residential mortgages. Thus, buy-to-let mortgages generally have higher deposit requirements and different lending conditions that applicants must meet. It is recommended that you earn at least £25,000 per year; otherwise, you may find it difficult to meet the buy-to-let property repayments. However, there are some lenders who do not have minimum income requirements.
Most lenders have age limits when it comes to buy-to-let mortgages, so you’ll need to be under a particular age to apply. Many people will set the top age limit at 70-75 years old. If the mortgage product you’re applying for has an upper age limit, you must be under that age limit when your loan term ends.
Also Read: Wondering What is The House Buying Process? We Got You Back!!
How Does Buy To Let Mortgage Work?
Buy-to-let mortgages are similar to normal mortgages, but there are a few major differences. The fees are usually much higher, and Buy-to-let mortgages generally have higher interest rates. A buy-to-let mortgage normally requires a minimum deposit of 25% of the property’s worth (although it can vary between 20-40 percent).
The majority of BTL mortgages are interest-only loans but the buyers have the option to have a repayment mortgage also. It means you only pay the interest, not the principal, each month. You pay the original loan in full after the mortgage term. Paying down BTL mortgages are also accessible.
The Financial Conduct Authority(FCA) does not control most BTL mortgage lending. Consumer buy-to-let mortgages are a bit different from business BTL mortgage. They are analysed using the same tight affordability guidelines as mortgage loans.
Where can I get a buy to let loan?
BTL mortgages are accessible from most large banks and some specialised lenders. Before you take out a buy-to-let mortgage, it’s a good idea to talk with a buy to let mortgage broker in London because they can help you find the best deal and give you BTL mortgage advice.
Also Read: Buy To Let Property: Which One Is The Best Limited Company vs Personal Investment?
What is the difference between a residential and a buy to let mortgage?
Buy-to-let mortgages, unlike most residential mortgages, are frequently given on an interest-only basis. It ensures your monthly payments will only cover your mortgage interest. Unless you choose to make extra payments or take out a repayment mortgage, your capital debt — the money you’ve borrowed – will not decrease. At the end of your term, you must pay off the capital loan in full. You can do this by choosing to sell the property or keeping it and taking out a new mortgage.
A greater deposit is usually required for a buy-to-let mortgage than for a residential mortgage. You will have to pay higher upfront fees and a higher interest rate in some cases. If you buy a second house that isn’t your primary residence, you’ll have to pay higher stamp duty. For tax purposes, some buy-to-let investors choose to structure limited liability corporations (LLCs).
Conclusion:
Buy to let mortgages are helpful for both experienced investors and new landlords looking to enter the rental property market. So if you are thinking about BTL, you must hire a buy to let mortgage broker in London, and Mountview Financial Solutions would help you make the correct decision.
