Mortgages used for property that is purchased for investment purposes are known as buy to let mortgages. This industry has progressed considerably over the past decade as more and more individuals consider buy to let as a strategy to secure their financial futures. With this significant growth, the buy to let products became increasingly sophisticated and much broader options are now available to landlords of different status to diversify their investment properties accordingly.
Understanding Buy to Let
You should understand that a buy to let mortgage is distinct from a standard residential mortgage or bad credit remortgages, for the reason that numerous buy to let lenders do not establish their lending requirements and criteria based on the purchaser’s income. Instead it is frequently transacted based on the rental income that can be procured by the buy to let property. Note though that most of the time, it is discerned on a percentage coverage ranging from 100% to 130%, while some lenders may grant mortgages on a buy to let basis without the smallest rental income figure.
These mortgages have customarily permitted borrowings of 85%, as the maximum loan amount against the value of the buy to let rental property – meaning, the property buyer should provide the other 15% as a deposit amount for the property. The good news is that there are now buy to let products that allow property investors to acquire 100 mortgages on the value of the investment property, requiring no deposit at all.
Borrowing Limit
The most excellent buy to let products can be obtained from a number of different providers. It’s crucial to understand what you can get first and take into consideration the various choices available to you. In this industry that craves for every real estate investor to transact with them, it is really advantageous to monitor the buy to let market regularly since there are new mortgage products being offered every now and then.
While some investors may opt to keep their buy to let investment property with just a single mortgage lender, it is essential to recognize that various mortgage products ranging from remortgages and other refinancing products can grant you with maximum cash flow and flexibility depending on the method you structure your buy to let finance.
Worrying on Deposits
The buy to let property investment policies are pretty straightforward and simple if you carry out adequate research in the first instance. If you plan to invest in your first ever buy to let property but you don’t have at least 15% deposit in hand, then you may consider taking some equity from your residential property.
After establishing that you are in deed in a good financial standing to pursue your first buy to let acquisition, then you will have to familiarize yourself about the options available to you. You must also educate yourself about their regulations, so you can compare various products and buy to let rates.
Types of Buy to Let Products
The most popular buy to let products available in the market today are:
Variable Rates – These are products that come with the lender’s own mortgage rate and are subject to change when the lender modifies the rates – meaning, if you chose to have a mortgage with a lender’s standard variable rate, your repayments monthly will decrease or increase accordingly.- Discounted Rates – For a particular period of time, the lender furnishes a reduction on the standard variable rate (SVR). These products may present a discount of about 1.5% over a three-year term. Note though that the SVR decreases or increases during the discount term, but generally you pay a rate of 1.5% lower on the mortgage.
- Stepped Discount Rates – If you wish to retire wealthy, it is worth looking at a stepped discount for a buy to let investment, where the discount rate reduces after a particular period of time. For instance, you may be given a 1.5% discount for one year, then 0.75% the next year, and so on.
- Fixed Rates – The mortgage repayments of these products are based on the monthly outgoings set by the property investor and the owner for an established term.
- Capped Rates – These buy to let mortgages furnish a limit as the maximum level the rate of interest can go. The rate may move up or down but never surpass such limit. Your payments will be reduced in case the base rate decreases.
Variable Rates – These are products that come with the lender’s own mortgage rate and are subject to change when the lender modifies the rates – meaning, if you chose to have a mortgage with a lender’s standard variable rate, your repayments monthly will decrease or increase accordingly.You can make use of a buy to let mortgage calculator online to determine your repayment amounts and for comparing various quotes from different lenders.
