Buy-to-mortgages are sought by investors and landlords who wish to buy a property and immediately rent it without moving in. Unless you have the cash to buy the buy-to-let property outright with money, the buy-to-let mortgages UK come to the rescue of investors and landlords.
Here we have discussed the key pointers relating to buy-to-let mortgages.
How does a buy-to-let mortgage work?
Interest-only buy-to-let mortgages. With this, you only need to pay the interest on your mortgage month on month. However, the principal will have to be paid at the end of the mortgage. This is usually done by selling the property or paying it with savings at the end of the term. Mortgage advisors London will provide you with the best mortgage deals you can choose from
To avail BTL (buy-to-let) mortgages, credit checks are required, along with submitting proof of income and how much rental income you wish to receive from the property you are buying. This needs to cover 125% and 145% of your mortgage interest for ‘rental cover’. That means the monthly rent must be greater than your monthly mortgage payments.
There will be higher additional costs like arrangement fees for a buy-to-let mortgage, up to 3% of the principal amount. Generally, interest rates on BTL mortgages are higher than a standard residential mortgage. In addition to this, for BTL mortgages, a minimum deposit of 20%-25%. For cheaper interest rates, you will have to have a minimum deposit of more than 40%.
Who is eligible for a BTL mortgage
The following are the criteria for availing of BTL mortgages
– Annual income of more than £25,000, should already own a home that is either under a mortgage or bought with cash.
– Have a good credit score and is under the required age. The upper limit for paying a mortgage is at 70-75 years of age. Hence it will be difficult for a 55-year-old to secure a 25-year BTL mortgage.
How much can you borrow?
Lenders will consider the rent you expect to earn out of the property. This is an important criteria that will decide the mortgage amount. The higher rent will help secure a higher mortgage amount. Other factors include credit secure, income proof. By considering these factors, you can work out how you will borrow to manage your finances. A mortgage broker can also help you calculate how much you will be able to borrow
Your rental income will have to cover between 125% and 145% of your mortgage interest. This will heavily affect the mortgage you will be able to borrow.
How to choose the best buy-to-let mortgage?
You can search for the best mortgage deals online by comparing prices on various websites. Another sure shot way to find the best mortgage deal is by seeking the help of a mortgage advisor. The best mortgage broker will help you find the best mortgage with low interest and a higher borrowing amount.
Once the mortgage amount is confirmed, it is also important to work out all the additional costs and keep finances ready to avoid unexpected last-minute expenses.
