Interested in buy to let mortgages?
As independent financial advisers, we can locate the very best buy to let mortgage deal for you.
Independent advice could save you almost £1,000 per year on your mortgage repayments!*
The option of buying a property with a view to letting it to tenants can be a prudent part of your financial planning, and in particular your retirement and pension planning.
Hear about buy to let as part of your retirement planning by taking free pension advice
A property has the potential to increase substantially in value. It can therefore be regarded as an investment in itself, as well as an ongoing source of monthly rental income. A rental property can therefore be seen as a supplement to your regular income, and as part of your investment portfolio as well.
However, property is a long term investment, and you should be prepared to leave your money tied up for a lengthy period. In retirement, you can continue to take the rental income as a supplement to your pension, or sell the property to give yourself an additional ‘nest egg’.
Deposits for buy to let mortgages
With a buy to let mortgage, the minimum deposit required is generally 25% of the value of the property. Lenders take into account your salary plus potential rental income, when calculating how much they are prepared to lend you. Generally, lenders will expect your monthly rental income to be at least 25% greater than your mortgage repayment. This aims to take into account additional costs such as buildings insurance and rates. You may also wish to use a managing agent to look after the property for you. This is another cost that must be taken into account, when considering your mortgage.
It is also important to remember that if interest rates rise, so does your mortgage repayment, but you may not be able to increase the rent immediately to compensate. There is also the possibility that, at times during the lifetime of your mortgage, you may have no tenants in your property. This will leave you with no income, but your mortgage repayments must continue to be paid.
Work out your mortgage repayments with our mortgage calculator or call 0800 678 5929 now
What type of buy to let mortgage?
When choosing a buy to let mortgage you will generally have two options, a repayment mortgage or an interest-only loan.
With a repayment mortgage, you may be able to choose between fixed rate or variable. A fixed rate guarantees that your monthly payment does not change for an initial term, usually the first three or five years. This enables you to plan, knowing that your outgoings are fixed. Once this initial period expires, the repayment is no longer fixed, and normally reverts to your lender’s standard variable rate. From this point on, the payment may rise or fall, depending on the Bank of England’s base rate.
With a variable rate mortgage, there is no initial fixed period, and your monthly repayment can change at any time from the outset.
An interest-only loan is a popular option in relation to buy to let, as the monthly repayments are less than on a repayment mortgage. With interest-only, you repay only the interest due each month, but the capital loan (i.e. the amount initially borrowed) is not paid off gradually, it is repaid with one large payment at the end of the term. You may plan to cover this by selling the property. Alternatively, you can make a separate investment designed to pay off the capital loan at the end of the mortgage.
Let to buy mortgages
With a let to buy mortgage, you buy a new home to live in, but retain your old home with a view to renting it out. The deposit for a let to buy mortgage is often lower than that required for buy to let.
Use our mortgage calculator to check your buy to let repayments or call 0800 678 5929 now
