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Buy to Let Mortgages
With the current volatility of the UK pension market, managing your own portfolio of properties can be an attractive proposition. Over the long term property has historically been a very safe investment decision.
Lenders view buying property that you will rent to a non-family member as an investment. This means that they apply different criteria when assessing your application to those used for residential mortgages.
The Buy-to-Let market is developing very rapidly but the following is an idea of what a Lender may expect:
- They will frequently ask that your tenants sign an Assured Short hold Tenancy agreement. This is renewable every 6 months (rather than 12 or 18) and protects you in the event that you have unreliable tenants.
- Many lenders (although not all) will evaluate affordability by comparing the rental income to cost of the mortgage. They will want to see that the rent received for the property will exceed the mortgage payments by a comfortable margin (e.g. Rent = 120% x £ interest-only mortgage payment).
- No reference schemes, which don't require you to prove the rental income, are available however they generally cost more
- Lenders will usually have some kind of limit regarding the number of properties you can own (e.g 10) or the maximum overall value of your property portfolio (e.g £1M)
- Be realistic - you are likely to have to supply a deposit of 15% or more, especially if you want the more competitive rates. When deals sound too good to be true, they usually are
- Buy-to-Let interest rates are generally slightly higher than those for residential mortgages because of the risk involved in renting property out - although this gap is closing fast
- At The Mortgage Shop we can help you to arrange a buy-to-let mortgage if you have had credit problems in the past.
Remortgaging an Existing Buy-to-Let Property
You should evaluate the mortgage regularly to maximise the return on your property investment.
The Mortgage Shop have access to a panel of lenders who will consider remortgaging an existing property in your portfolio and may be able to help you save money or raise a deposit for another investment property.
For Adverse Mortgages The overall cost for comparison is 8.8% APR. Actual rate will depend upon your circumstances. Please ask for a personalised illustration, Rate correct as at 07/06/2008
The Financial Services Authority does not regulate most Buy To Let Mortgages.
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