Buy to Let mortgage

Buy to Let mortgage are different from a residential mortgage because the lender calculates the size of your loan not on your income but on the potential rental yield of the property you wish to buy.

Buy to Let mortgage lenders offer up to a maximum of 90% loan to value, although one or two have started to offer 95% Buy-to-Let mortgages. Therefore a minimum 10% deposit is required in most cases. Buying a property to let out has now turned into a viable and profitable option for many people. Although the emphasis is currently on longer-term investment rather than making a quick profit, there is still potential for a good return on your initial investment.

Broadly, there is little difference between arranging a Buy to Let mortgage for investor landlord’s and a standard mortgage for owner occupation. Buy-to-Let mortgages are subject to the usual status checks. Loans can be arranged for terms of between five and 45 years and for up to 90% of the value of the property, although the majority of Buy to Let lenders restrict lending to 85% of the property value.

Typically the mortgage lender calculates the maximum Buy to Let mortgage based on the rental income covering the mortgage by 100% - 130% of the proposed monthly mortgage payments based on anything from the pay rate to 1% over the Bank of England base rate on an interest only basis. Every lender calculates their maximum lending in a different way, but the following two calculations can be useful in determining either 1) the mortgage available if you know the rental income expected or 2) the rental income rquired if you know the maximum loan desired.

1) Rental income divided by 125% multiplied by 12 and then divided by the standard variable rate gives the maximum loan available. ie:-

£750 ÷ 125% x 12 ÷ 5.75%(SVR) = £ 125217

2) Loan amount multiplied by SVR divided 12 and then multiplied by 125% gives the rental income required ie:-

£125217 x 5.75% ÷ 12 x 125% = £ 750

Buy to Let mortgages ...................

Two features make property a particularly attractive investment. A Buy to Let mortgage allows you to borrow the lion's share of the property value, whilst also enabling you to keep the growth in the value of the whole property - not just your deposit. This process is known as 'gearing' and is the key to the attractiveness of buying to let.

Example of Buy to let mortgage criteria.

• A minimum income per application of £10,000 per annum is required.
  
• Max No. of Properties 4 - Unlimited
  
• Max. Lending £2 million
  
• Max. LTV 90%
  
• Maximum lending per property £1 million.
  
• Minimum acceptable property value or purchase price (whichever is lower) is £40,000 (£75,000 in London postal districts).
  
• Rental income must cover 125% of the proposed monthly mortgage payments based on standard variable rate on an interest only basis. (100% rental cover available)
  
• H.M.O , Student lets, and D.S.S. lets possible.
  
• Confirmation of anticipated rental income will be provided by the valuer as part of the valuation.
  
• The property may be let on an assured shorthand tenancy or to a company on a corporate let. This can be renewed without the lenders consent.
  
• Holiday lets are possible.

To find out more about Buy to Let mortgages , simply complete the Buy to Let mortgage Mortgage Quote to receive details of the best Buy to Let mortgage to suit your individual circumstances. Alternatively call 0800 801079 to speak to a mortgage advisor.

 

 

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