Tue 08 May 2018
What is a buy to let?A buy to let is the purchase of a property that you intend to rent out to somebody else. If you require a mortgage to help with the purchase you will need to take out a buy to let mortgage.
The way in which you can make a profit from a buy to let is from the rental income (you should charge more than the cost of the monthly mortgage repayments) and from capital growth if you sell your property for more than you paid for it. The price of the property would have to increase more than the rate of inflation.
Expert Independent Mortgage Advisor Richard Lester from Apt Financial Management offers a brief low down on how buy to let (BTL) mortgages work;
What is a buy to let mortgage?BTL mortgages are a type of semi-commercial mortgage. They are designed to provide property investors a mechanism for purchasing residential property for the purpose of letting and achieving long term capital gain.
Types of buy to let mortgagesThe products available from lenders are similar to residential mortgages, you have the option to look at fixed and tracker rate products. Interest only is a more common repayment method with BTL's but you can still take them on a repayment basis.
Is the lending criteria different to a residential mortgage?Although buy to let lending is generally based on personal income a certain level of earned income is required. The amount of mortgage is usually justified by a calculation around the rent received compared to a notional rate of interest designed to safe guard against future rate rises. The loan is multiplied by a rate of interest, typically 5.25% and then a margin of 25 to 40% is applied. The annual potential rental income needs to at least match this figure for the loan to be agreed. Some lenders can be more forgiving and apply lower rates or lower margins to mean a lower rent is required so it is best to seek advice before applying.
How much deposit would I need for a buy to let purchase?Deposits required are generally higher than those needed for residential mortgages, typically being at least 25%, although some specialist lenders may consider less.
Can Apt Financial Management help me get a buy to let mortgage?At John German we recommend APT for free independent mortgage advice. They deal with BTL mortgages on a daily basis and have helped many landlords build successful property portfolios, navigating them through the ever changing BTL mortgage market.
Whether it is your first toe in the water as a landlord or you are adding to your portfolio, APT can advise you on the best route forward and help to smooth the application process by providing independent expert advice. For more details email firstname.lastname@example.org and we will put you in touch with them.
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