A buy to let mortgage is a loan for someone who purchases a residential property with a view to renting it out as an investment.
Mortgage lenders view Buy to Let as a greater financial risk because immediate vacant possession is not always guaranteed.
Therefore mortgage lenders tend to:
• Ask for bigger deposits, usually 15-25%
• Charge a higher rate of interest
• Require the rental income to be greater than the interest element of the monthly payment.
• Usually charge higher mortgage arrangement fees or slightly higher rates
• Require a minimum income, usually £25k per annum
• Require the applicant to be a homeowner
A few mortgage lenders don’t require a minimum income, speak to one of our mortgage advisers and we will go through your options. Mortgage lenders will view applications on a case to case basis.
• Research the market
• Find the right area
• Think about your target tenant
• Go for rental yield
• Calculate the maths including ongoing maintenance and tax
• If First Time Landlord, use a reputable letting agent to begin with
• Property has to be suitable for rent on completion of mortgage application
• Have sufficient funds to cover void periods
• Speak to a whole of market mortgage broker
For further info, please contact us.
We have access to the whole market and based in Manchester city centre.
If you haven’t found a property, a mortgage ‘Agreement in Principle’ (or a Decision in Principle) is useful, knowing you’re not wasting your time house hunting. Mortgage lenders will carry out a credit check with basic information ie 3 years address history, occupation, credit commitments… Information is cross referenced with credit reference agency mainly with Experian or Equifax.
Every mortgage lender has its own credit scoring system and you will receive one of three responses; pass, refer or a decline. A ‘refer’ is when a mortgage underwriter needs to look further and responds within 24-48 hours. If you haven’t been accepted, avoid searching further. If you pass, the mortgage still requires full underwriting. An Agreement in Principle is not a gaurantee.
If you haven’t found a house, seek advice to begin with. You may not need an Agreement in Principle because the advisor is confident enough to agree you nearer the time ie just before you place an offer. A credit search carries a footmark on your credit file and better products maybe round the corner. An agreement in principle takes us an hour max, so we can work around your needs.
Estate agents will want proof of finance at either viewing or offer stage; our advice is to seek whole of market mortgage advice prior to house hunting covering approx monthly payments, set up fees, budgets etc… Its important to recieve unbiased advice. Giving the estate agents your financials will not give you much room to negotiate they always work for the vendor.
In some instances an applicant will need an Agreement in Principle for reassurance and is not wasting their time house hunting; particularly applying for a high to loan value mortgage i.e. 90-95% or with poor credit scores. In this instance, you need to speak an experienced mortgage adviser as it’s important to choose the right mortgage lender based on your circumstances.
Tip- don’t be pressured into an Agreement in Principle, seek advice initially. In most instances, we call the estate agent on your behalf and reassure them you’re good to go, avoiding unnecessary credit checks.