How Do Buy To Let Mortgages Work ?
If you’re thinking of becoming a landlord and are looking for finance to purchase your first rental property you might be wondering exactly how do buy to let mortgages work.
Most lenders will not let you take out a standard homebuyer mortgage, like you might have on your own home, if you intend to let the property out to others. Instead you will need to take a specific buy to let mortgage.
How do buy to let mortgages work?
Like a normal mortgage a lender will require you to put down a deposit on the property, and the larger the deposit you can afford to put down the better interest you will receive.
As a general rule lenders require a larger deposit than you would expect to pay for a buy to let mortgage of the same size, the standard minimum deposit size is often 25% however it is worth shopping around to see if you can find a buy to let mortgage with a loan to value that fits your needs.
One of the key differences between a buy to let mortgage and a traditional mortgage is how your affordability is calculated. Instead of it being a multiple of your income lenders generally require the property’s annual rental yield to be at least 125% of what your mortgage would cost you in repayments annually.
Looking at property websites or speaking to a local letting agent could help you find out what a property in a certain area could be let for however a lender will not base their calculation on what you tell them you are intending to charge for rent, during your application there will be a professional valuation of the property that they will base the potential rental yield on instead.
As with other kinds of mortgage there is a range of repayment plans, where your monthly charge pays off a portion of your loan, and interest only plans – in which at the end of your mortgage term you need to repay your loan in full as the monthly payment only covers the interest that accrues on the loan.
Terms and conditions
Lenders may also have certain stipulations about what you may do with the property over the course of the mortgage, for instance some may require you to have a minimum tenancy length agreed with your tenants or will not let the property as certain kinds of tenancy. Many lenders require you to take out a specialist landlord buildings insurance policy.
Finding a buy to let mortgage
BTL mortgages like most kinds of mortgages are big financial commitments and can take a long time to pay off, therefore if you are interested in one it is worth shopping around to compare the market to try and find the best plan for you.
If you’re currently looking for buy to let finance you may find using the Fair Mortgages calculator helpful, you just need to select ‘buy to let’ from the drop down menu and fill in all of the relevant information, the buy to let calculator can then filter you a selection of buy to let mortgages that fit your requirements and might be available to you. You can then compare and contrast their different features to see if you can decide which you would prefer.
If you’d like to find out more about buy to let mortgages you could fill in the enquiry form on this website to request a call back from a Fair Mortgages Advisor who can provide you with a free initial conversation about mortgages.
Our Buy to Let Mortgage Broker Service
Why choose us?
Fair Mortgages can provide you with a first class service if you are looking for buy to let broker mortgage service.
Special features of what our broker service offers include:
- Rental Income Requirements - What lenders now require on rental income - we can help you through the lender criteria maze
- Whole of market btl broker - we deal with most UK buy to let lenders
- Buy to Let Rates - Access to leading buy to let market rates
- Exclusives - Access to exclusive buy to let mortgage deals not available on high street
- Our BTL Experise - Expert help whether you are a first time landlord or full time landlord
- Credit Issues? - We have lenders who will take into account previous defaults and missed payments if applicable
- Experienced BTL Investor? - Have a complex buy to let or have a portfolio of 5+ properties? - speak to us
To investigate your buy to let mortgage options call our specialist team on 0117 313 7780 or fill in our call back form.