Borrowing to invest in a rental property
Whether you are looking at buying-to-let, where you are borrowing to invest in a rental property, or letting-to-Buy, if you want to turn your current home into a house that generates income, the Buy-to-let mortgage market is a specialized one.
Lenders generally view buy-to-let mortgages as higher risk than residential mortgages because they know that many landlords rely on rental income to make the mortgage repayments and if the property is vacant for a period, there is no income. Because of this perceived risk, interest rates tend to be higher than residential mortgages, and the lender will usually demand a higher deposit. Stamp duty charges are also 3% higher than residential mortgages.
Typically in the current market, you will struggle to borrow more than 75% of the property value, and any lender will look for rental income that covers around 125% – 145% of the mortgage repayments.
However, despite the risks and costs associated with buying-to-let, the main benefit is for its investment potential – both capital growth on the value of the property and the income it generates in rent. The buy-to-let market that exists today has a huge part to play as first time buyers are getting older and younger people are renting.
When borrowing to invest in a rental property it is important to ensure you have a clear understanding of the process, benefits, risks and associated costs. By seeking Independent Mortgage Advice, you will get access to all the non-directly brokered mortgages available across the marketplace, i.e. not limited to a select few lenders, so you are more likely to get a better rate. Also, taking advice from a financial adviser as opposed to a mortgage broker is advantageous because the adviser will look at the mortgage in a holistic context, so the mortgage is going to fit into your financial plan and work for you both in terms of grown and risk hedging.
For new clients, we charge an initial engagement fee of £250
For existing clients, we charge no engagement fee, i.e. £0
We also charge a small loan fee of £499, on application, but only if the value of the mortgage loan/(s) are less than or equal to £300,000. However, if we are doing more than one mortgage for a client, i.e. a Let-to-Buy scenario, and the cumulative value of the mortgages is greater than £300k, then we do not charge the small loan fee.
Before meeting with a prospective mortgage client we will qualify all mortgages over the phone.
For a small engagement fee, we will take the hassle out of applying for a mortgage or remortgage. This includes providing you with best options, advice and implementation, saving your precious time and money: so why go directly to your bank?
For more information, please get in touch.