Like all mortgages, Buy-to-Let Mortgages, sometimes called Investment Mortgages, have become a lot harder to find, and of course lenders are really only interested in fairly high loan-to-value deals. On top of all this they are loading them with very high up-front 'arrangement' fees.
They were introduced in 1996 and have grown in popularity ever since.
Looking for a good Buy-To-Let Mortgage or to Re-Mortgage?
When it comes to buy to let mortgages, lenders are primarily interested in the rental value of the property. However, they often also like to know that you have some reasonable income beside that from your rent, in case of void periods. So you will probably have to demonstrate to them that you have some alternative income, unless of course you have a large number of investment properties, particularly with relatively low loan to values.
The main criteria that lenders normally use
• The gross monthly rent will need to be at least 130% of the monthly repayment.
• The rental income must produce an annual rental yield of more than 8% of the actual mortgage granted.
• You should have at least a 15% deposit, although this is now tending towards a minimum of 20%.
• Many lenders will not lend on properties of more than six stories. • Some lenders (a small minority) will not lend on ex-local authority property. • They still need to satisfy themseves as to the general build quality etc as a long term capital investment.
• Lenders usually want there to be a minimum of 60 years remaining on the lease.
Things to look for when obtaining a buy-to-let mortgage or re-mortgaging
Firstly you will need to decide on whether you want an Interest Only Mortgage or a Repayment one or any of the bewildering number of hybrids. This will obviously depend on your personal circumstances, although I must say that I personally like Interest Only because you at least know that you are paying the correct amount!
t's important to work out the TOTAL cost of your mortgage. Total costs include the full amount of interest over the term, plus any arrangement fee, survey fee, and legal fees. These days lenders are tending to load mortgages at the front end with sometimes huge arrangement fees. Bear in mind that although fixed rates give you some certainty on your outgoings, as in everything, you will usually have to pay for that priviledge.
If you have reasonable resources, a Discount Tracker can be a better bet. But, always check exactly WHAT the mortgage tracks. It's best that it track the Bank of England Base Rate, such that the lender will have to lower the rate within one month of any reduction in the base rate. With other trackers they tend to put the rate UP quickly but are not always so quick to lower it in response to a fall in rates!
Also, remember that if it's a good product, it's better to lock in for longer rather than shorter as you'll just be faced with all the costs again in a couple of years. Finally, always always check what the penalties for early redemption are and most importantly never ever get a mortgage with an 'overhang penalty' – where even after the term of the product ends you are still liable to pay a redemption fee for up to a couple of years whilst your rate has actually been returned to the company's Standard Variable Rate.
What is YOUR opinion of HIPs?
Do you think that Home Information Packs (HIPs) were a good idea?
