Mortgages
Should I get a buy to let mortgage?
We’re living in times of historically low interest rates and low savings returns. With a strong rental demand, it’s no wonder so many people are keen to get property ownership onto their portfolios. But with Government tax changes coming into effect it’s vital you get the right advice and the right mortgage.Woodhall Mortgages can help you find the most competitive mortgage rates, and show you how to make a decent return on your investment.
If you’re a landlord or wish to become one, a buy-to-let mortgage will set you on the path to becoming a property investor.
Investing in your future
Buy-to-let can be a great way to diversify your portfolio and supplement your income, but it is essential to do your research and get the maths right. Searching for the right property can be exciting, but it’s important to avoid any pitfalls. Buy–to–let mortgages differ from normal residential mortgages, usually you require 25% deposit may have higher mortgage fees. You’ll then need your buy to let rental income to cover the mortgage lenders stress test levels and may need to show a minimum personal income. If you’re thinking of investing in buy-to-let property, or just want a chat to find out more, why not call one of our expert advisors today?
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.
Why is it a good idea to use a broker for a Buy To let mortgage?
In Demand
Demand in the rental sector remains strong. If you have the means and the right advice buy-to-let properties could be a great investment for you. With careful management and the right property, you could see a rental yield of 5-10%.
Different Types of Buy- To-let Mortgages
There are many different types of buy-to-let mortgages out there, from fixed rates to variable rates. A fixed rate means the interest rate is set by your lender, and won’t change for an agreed number of months or years. A variable rate is usually set according to the Bank of England’s base rate.
Constantly Changing Market
Recent tax changes mean it’s more important than ever to speak to the right people to find the best mortgage deals. Starting in 2017, but not fully implemented until 2020, landlords won’t be able to deduct the cost of their mortgage interest from their rental income.
Different Criteria
Buy-to-let mortgages are different from standard residential mortgages because the property is intended to be rented out to tenants. You will typically need a 25% deposit and mortgage arrangement fees are often higher.
Do You Know All The Risks?
Are you prepared for the pitfalls? At times you may find your property sitting empty. Can you afford the loss of income? A good bit of advice is to factor in a two-month buffer when you budget for the year. Properties often need urgent maintenance and repair – a broken boiler or pipe leak. Could you afford this? Before you invest, speak to our advisors and they’ll help you prepare for every possible outcome.
Buy to Let Mortgage F.A.Qs
The minimumdepositfor abuy-to-letmortgage is usually 25% of the property’s value (although it can vary between 20-40%). Most BTL mortgages are interest-only. This meansyoupay the interest each month, but not the capital amount. At the end of the mortgage term,yourepay the original loan in full.
Although it’s notillegal to livein your ownbuy-to-let property, if you dolivein it you will be in breach of your lender’s terms and conditions. If you intentionallylivein yourbuy to let propertyyou could be committing mortgage fraud. If the lender finds out they may ask for an immediate repayment of the loan.
Also, getting abuy-to-let mortgagemayaffectyour ability to get a residentialmortgagein the future. For example, if yourbuy-to-letproperty doesn’t earn enough rent to cover themortgagerepayments, this mayaffecthow lenders decide what youcanafford.
Applying for abuy-to-let mortgageis not as easy asgettinga standard residentialmortgage. … You will also much more likely find a lender who will provide you amortgageif your salary is over a certain amount. Most lenders expect landlords to be earning at least £25,000 a year.
You need to declare that afamily memberwilllivein the property and pay yourent, when you first submit the application. Not all lenders offer second home mortgages, so it’s best to speak to a broker.
If your lender doesn’t grant consent tolet, or it’s not suitable for your situation, youcanswitch themortgageon your home to abuy-to-let mortgage. Tochangeyour residentialmortgageto abuy-to-letone you would remortgage onto a completely new product, potentially with a new lender.
House price gains have boosted returns over recent years, but much of the long-term appeal forbuy-to-let investingcomes from the rental income. Any aspiringbuy-to-let investormust consider the yield of a potentialinvestmentbeforebuying.
The key benefits tointerest–only mortgagesfor landlords are flexibility and tax efficiency, although the amount of tax you can save is changing. In terms of flexibility,interest–only mortgagepayments are simply lower than if you’re also making repayments.
Once youbuya property, you can potentially earn aprofitin two ways:
- Rental yield – what your tenant(s) pay inrent, minus any maintenance and running costs, like repairs and agent fees.
- Capital growth – theprofityou earn if you sell your property for more than you paid for it.
