Apr 15, 2015
If you are thinking about becoming a landlord or renting out your home, this is a must read for you. If you are renting out your home and you are thinking of trying to get a home loan, then a buy-to-let mortgage might be the way to go for you.
What is a Buy to Let Mortgage?
European Property spoke to an expert on at Clydesdale Bank regarding buy to let mortgages Clydesdale Bank who explained “They are very similar to a standard mortgage, a lender will offer you a loan that is secured against the property that you will be purchasing, or property that you already have”. Clydesdale told us “Like a standard mortgage, you can have a variable rate, buy to let mortgage, or you can get a tracker or a fixed mortgage”. “One major difference between them is a buy to let mortgage is not your typical repayment type of arrangement, instead it is interest only”.
This Means Cheaper Rates
This does make your loan more inexpensive and sometimes you can even offset the payments against your tax bill. But, keep in mind that it also means that the size of your loan will never get lower. So you need to pay very close attention to what type of arrangement you are getting yourself into. Also very different from a regular standard mortgage, instead of basing how mucthat you can borrow, on your income, a buy-to-let mortgage will decide based on the potential rental value of the home in question. One other thing to remember is that with a buy-to-let mortgage you will generally have more restrictions than you would on a standard mortgage.
Can you get one?
A lot of lenders want you to be over the age of 25. And they also usually will require you to put down a larger deposit. In most cases it might be 25% of the value of the home. You also might incur a higher interest rate in these cases. Currently however, most buy-to-let mortgages have an interest rate of less than 2%. Another thing to pay close attention to is that a lot of buy-to-let lenders will expect the rental income to be equal to or at the very least, 125% of the mortgage cost. This is to ensure that there will be coverage for any time there might be without tenants. Lenders will also want you to have a minimum income to go along with the rental value. This is usually only around 25,000 per year though, so it shouldn’t be a deal breaker for you. There are two other restrictions that you should pay attention to as well. Usually there is a limit of three buy-to-let mortgages at the same time, along with a limit on the total you can borrow as well.
If you can meet these requirements in full, and have the available money for a good deposit, you should have no problem in getting a buy-to-let mortgage.