Applying for a buy to let mortgage is the most common way to finance buying a rental property if you do not have the money to make the purchase outright. If you are thinking about going down this route, there are some key things that it is useful to know before you start.
Different lenders will have their own specific criteria to determine who qualifies for a buy to let mortgage. There are several common requirements that most lenders will conform to, however.
Most buy to let mortgage applicants will need to:
Although these are common restrictions on who can access buy to let finance, not all lenders will apply them to all customers. If you are worried you might not qualify it is highly worth speaking to a mortgage advisor as they can recommend lenders who may still be willing to consider you if you don’t fit the standard criteria.
There are several key factors which will influence how much your buy to let mortgage ultimately costs you:
The amount you pay each month and how much you have to repay when the mortgage ends will largely depend on the type of mortgage you choose.
An interest only buy to let mortgage lets you pay just the interest due on your mortgage each month. You then have to pay off the full capital amount when the mortgage ends.
A capital and interest mortgage means paying the monthly interest, plus putting money towards paying off the capital. This can allow you to pay off the full capital, or just part of it, over the lifetime of the mortgage, so you either have nothing or a reduced amount to repay when the mortgage ends.
One of the main things which influences the interest rate you will be offered is your loan to value (LTV) ratio. This shows how much your mortgage is as a percentage of the value of the property you are buying. Lenders will usually offer better interest rates on mortgages with a lower LTV.
It is also worth bearing in mind that most lenders will want the monthly rental income on your property to exceed the interest only payments on your buy to let mortgage. You should therefore factor this in when thinking about how much you will be able to afford to borrow.
Get the best deal on your buy to let mortgage using our free mortgage calculator. This allows you to compare interest rates and other features of mortgage deals that match your borrowing needs from across the market. Simply follow the link and select “Buy to Let” in the “Reasons for mortgage” field to see a wide range of appropriate deals for you to choose from.
