Whether you’re purchasing your first investment property, you’re a professional landlord with a portfolio of properties looking for a better deal or you’ve retained a property following a house move or wish to do so, understanding how the Buy-to-Let and Let-to-Buy markets work is imperative.
Calculating the true cost of a buy to let or let to buy mortgage is not straightforward.
Buy-to-let & Let-to-Buy mortgages are unlike the traditional residential mortgage you might take out for your own home, for instance, how much you can borrow does not specifically depend on how much you earn and is based on numerous factors: the earning potential of the property (i.e. the rental income), the equity or deposit readily available and the rental income calculations – and these vary greatly from lender to lender – all have an impact on the amount you can borrow.
A Buy-to-Let mortgage is a mortgage specifically designed for the purpose of buying a property to let to tenants rather than to live in oneself.
A Let-to-Buy mortgage is a mortgage specifically designed for the remortgaging of your current main residence to enable you to purchase a new residential property taking out a separate “traditional” mortgage – for example, if there’s enough equity available in your current property you could release it to put down as the deposit on your new home.
You would then let out your existing property, using the rental income to cover the Buy-to-Let monthly mortgage payment & your salary to cover the mortgage on your new residential dwelling.
There are additional stamp duty and legal costs involved in Buy-to-Let properties. You should obtain a note of these costs before you proceed with any investment.
There are now plenty of competitive mortgage deals available that are specifically aimed at the buy-to-let & let-to-buy markets – making it paramount that right correct lender is chosen, as such our advisers will take time to discuss all of this with you to ensure that the lender and the product recommended is the very best deal available, offering specialist advice, tailored to meet your specific needs, whatever your circumstances.
The key differences are explained in more depth below:
You will be required to put down a deposit, this amount is typically larger than for a standard residential mortgage – it will likely be 15-25% of the property’s value.
Largely assessed on the property’s profitability, i.e. how much rent it can generate vs. the cost of the mortgage – rather than on your own personal financial circumstances. That said, many buy to let lenders will require you to have a minimum salary, typically £25,000+
Your expected rental income must exceed your mortgage repayments by a certain percentage – for example, your mortgage lender may require a rental income of 135% of your monthly mortgage payments – this calculation differs greatly between each individual lender
It’s common for the interest rates on buy-to-let mortgages to be higher than residential mortgage rates
Arrangement fees are typically higher than those charged on a traditional residential mortgage. You may also find that arrangement fees are calculated as a percentage of the amount you’re borrowing, rather than just a flat fee.
To discuss your mortgage requirements in more depth please contact Roxburgh Financial Management by phone on 0345 434 9505, or email email@example.com or use the contact me option by clicking here
There will be a fee for mortgage advice, a fee of up to 1% of the mortgage amount may be charged depending on individual circumstances. Our typical fee is £395.00, payable on application. A mortgage is a loan secured against your property. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
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