Buy to let mortgage advice
Published 16th August 2017
With interest rates being so low, we are receiving more and more enquiries from investors asking for buy to let advice in 2014. Those looking at getting a buy to let mortgage want to make the most of their money, so the advisors we work with make sure everyone gets the best buy to let mortgage deal possible.
Every customer is different, and so is every lender. With that in mind we have enquiries from potential borrowers with all sorts of situations that require specialist knowledge of the different buy to let mortgage criteria in order to place with the best lender. The specialists commonly help customers from the following backgrounds:
- Bad credit buy to lets
- No income buy to lets
- Buy to lets with sitting tenants
- Expat buy to let
- Buy to let through ltd companies
- First time buyer buy to let
- New landlords
- Experienced landlords
- Multiple property portfolio landlords
- And many more…
There’s a lot of ‘financial help’ spam online, especially for mortgages, so I have decided to compile a few buy to let tips on how to make sure you set up your mortgage on the terms that best suit you. The following relates to buy to let mortgage advice UK wide, for advice on international overseas buy to let and holiday property please visit our international mortgages section.
Getting the best buy to let mortgage rates
The right advice on buy to let mortgages changes depending on which type of borrower you are, as different lenders offer different rates to first time landlords, first time buyer landlords who have never owned a property, and experienced landlords. It also makes a difference if you are looking for purchase or buy to let remortgage advice
- First time landlords are eligible for most mortgages so long as they meet certain lender criteria in terms of deposit and personal income requirements (if applicable).
- First time buyer landlords are very restricted in terms of what deals are available. Most lenders are not happy to lend in these circumstances, and those that do tend to require the applicant to afford the mortgage from their own personal income rather than based on the investment income alone.
- Experienced landlords often have the pick of the market, being eligible to the highest number of lenders and products. However, this depends on the amount of borrowing and number of mortgages they currently have, as some lenders penalise those with a larger portfolio by restricting total borrowing to a certain threshold, and will decline applicants who’s borrowing exceeds their limits.
- Remortgage buy to let deals are often the cheapest to apply for, as valuations and legal costs can be cheaper/free with some products. For buy to let remortgage advice please make an enquiry and one of the experts will talk you through it.
Buy to let mortgage rates: Fixed or tracker?
This is a good question, and an important one to get right if you are looking to make the most of the rental income by limiting the interest you pay on the mortgage. Fixed rates are often slightly higher than tracker rates but come with the added security of knowing your payments won’t increase over the term, which helps for budgeting and to offset the risk of rental income not covering the outgoings.
When you’re buying to let a property, finding the right advice is hugely important to a lot of borrowers especially when it’s their first time, because it’s a market most have never dabbled in despite often owning a property already. The truth is, it’s impossible to offer advice on rates because no-one knows what’s going to happen with rates. Taking a fixed rate offers security, but if rates don’t move may cost you more than a tracker overall. Taking a tracker might be cheaper initially, but if rates increase to higher than the fixed rate would have been, it may cost you more overall. It’s a gamble either way.
The best way forward would be to compare the two options, and assess how much you value the security of a fixed rate, and the implications on your personal outgoings should rates increase and the investment start costing you money. If you feel the risk is small and are confident you can afford payments if they did increase, then maybe a tracker would be best. If you are concerned about rates and budgeting month to month, then maybe a fixed is more appropriate even if it costs more.
Advice on buy to let mortgage terms
Selecting the mortgage term for a buy to let mortgage is not as imperative as it would be for a main residential mortgage because 99% of the time they are taken on an interest only basis, so a 5 or 25 year term, the monthly payment is the same. It’s only when you start repaying the capital does the term effect the monthly cost (paying back £100k over 10 years will cost more than if you spread it over 20 years). However, at some point you’ll need to pay back the money you’ve borrowed. Whether you do that on an on-going monthly basis, save up a lump sum, or sell the property is up to you.
It’s best to set the term around your individual repayment plan.
- Tenants paying the capital for you: Do you aim to repay the mortgage using the rental income? If so, how long will that take? For instance, it would take 18 years to repay a £100k mortgage if the rental income was £650pm and mortgage was charged at 4% interest.
- Selling the property: Maybe you plan to sell it once the property has increased in value a significant amount. In this instance it’s if you plan to sell within 10 years, then a 10 year term might be most appropriate, however often it’s best to take the longest term you can, to give you more time to realise the investment if it’s not quite at the level you want or you’re struggling to sell at the end of the term.
Where to go if I’ve been declined for a buy to let?
There’s various reasons why a lender may decline your buy to let application, it may be a credit history issue, maybe you’re personal income doesn’t meet their affordability threshold, or the type of tenants you want to rent to don’t fit with their policy. The good news is, for every lender that declines based on a certain criteria, there’s usually another that occupies that area of the market – you just went to the wrong one!
If you’re ready to make an enquiry please click to enquire below and an expert will be in touch ASAP. If you require help immediate assistance please call 0800 304 7880.