Whether you are buying your first rental property, adding to your portfolio or have inherited a property and want to rent it out, there are many legalities involved the buy-to-let world.
As a landlord, you will have access to a number of specialist lenders and mortgage products, and it can be complicated, but it doesn’t need to be.
Who can get a buy-to-let mortgage?
Firstly, and most importantly, you’ll be able to get a buy-to-let mortgage if you can afford the risk.
Investing can be risky so don’t put yourself under unnecessary pressure, and you should, realistically, be earning £25,000+ per year. If you don’t then you may struggle to find a lender that will approve your application.
Is there anything that I need to be aware of?
The fees tend to be much higher than when going for a residential mortgage, as are the interest rates as there are more risks involved for the lender.
Speaking of interest rates, most buy-to-let mortgages are interest-only, which means that you will only pay the interest off each month – not the mortgage itself – and will have to pay the capital off, in full, at the end of the term.
There is also usually a minimum deposit of 25% but it can vary between 20-40%, depending on which lender you opt to apply to.
The maximum amount you can borrow for a buy-to-let mortgage varies, and depends on the amount of rental income that you expect to receive from your tenants.
As a rule of thumb, lenders will want the rental income to be around 25-30% higher than what you’re paying on the mortgage.
What if there are periods of time where I have no tenants?
Unfortunately, that’s one of the risks involved in buy-to-let mortgages – there are going to be times where you have no rental income.
To prevent you from falling behind with your mortgage payments, you will need to ensure that, when you do have rental payments coming in, put some of it away as you may need a financial cushion for ‘voids’ or repairs.
This is just the tip of the iceberg when it comes to buy-to-let mortgages, so if you’re thinking about becoming a landlord or have made the decision to, get in touch with one of our advisers and they will be able to walk you through the next steps.