What is a buy to let mortgage?
If you are looking to buy or remortgage a property for the sole purpose of renting it out, chances are you will need a buy to let mortgage*. Affordability is often calculated very differently for a buy to let mortgage and the available mortgage products are quite different from those offered to residential mortgages. A good mortgage broker is paramount to help you navigate the complexities of the buy to let mortgage world. We at Warwickshire Mortgages, are local buy to let mortgage experts, and can help everyone from aspiring landlords to experienced landlords with large portfolios.
How is affordability calculated?
Most buy to let mortgages calculate your affordability based on the rental income you will receive from the property rather than the income you earn from your employment or self-employment. You would estimate the rental income by looking online at the rental price commanded by similar properties in the area. The estate agent marketing the property should also be able to give you a good idea of the rental capacity. The lenders valuer will give their opinion as to the rental income so make sure your estimation is realistic. Lenders apply a ‘stress test’ for the rental income which is much higher than the actual mortgage payment. This calculation varies lender to lender so having access to a wide range of lenders is essential. If the rental income falls a bit short for affordability there are options. Some lenders will allow you to add your earned income into the affordability calculation, potentially giving you a borrowing amount higher than one calculated with solely rental income. This is where having an experienced advisor with access to many mortgage lenders can be the difference between being able to buy the investment property or not.
Repayment methods
The majority of buy to let mortgages are set up on an interest only basis, although some landlords do opt for capital and interest mortgages. The decision is usually based on short term vs long term needs, whether you prefer to benefit from short term cash flow or long term equity gain. We will discuss your options with you and recommend a repayment method that best suits you and your own personal goals.
Limited company buy to let mortgages in Coventry and Warwickshire
For some landlords, there are certain tax benefits that can be gained by purchasing a property through a limited company rather than in your personal name. Our experienced team can discuss the differences and share the mortgage products that are available, although we would always recommend you seek advice from a tax adviser.
What deposit will I need to purchase a buy to let?
The minimum deposit for a buy to let is 20%, although there are very few lenders who offer 80% loan to value mortgage products, and so the interest rates are typically a lot higher. The majority of landlords will need to aim for a deposit of at least 25% of the property value, although in some cases a higher deposit may be required.
What buy to let mortgage circumstances can we help at Warwickshire Mortgages?
Almost all but get in touch if you fit any of the below:
- A first-time landlord
- A landlord looking to expand your property portfolio
- An existing landlord with a buy-to-let mortgage that is up for review
- A landlord looking to re-mortgage for a better deal
- Someone who is interested in converting your existing mortgage to a buy-to-let mortgage
- Someone planning on refurbing your existing house to let it out
- Someone planning to raising capital from your buy to let property
- Someone wanting a buy to let mortgage but don’t know if your changed circumstances will affect your mortgage application
- Someone who is concerned that your previous financial or credit history will have an impact on a buy to let mortgage application
Which areas can we cover?
We can help buy to let landlords in Coventry, Warwick, Leamington Spa, Stratford upon Avon, Kenilworth, Nuneaton, Bedworth, Atherstone, Coleshill, Southam, Rugby and the surrounding areas in our office and the rest of the UK via telephone/ video call.
*Please note that some forms of Buy-To-Let mortgages are not regulated by the FCA