How to obtain a buy to let mortgage

buy to let mortgages guide
buy to let mortgages guide

 

Buy to let’ is a British phrase and as the name connotes means to lease out. A buy to let mortgage Is a mortgage in which the landlord purchases for the sole purpose of leasing it out. Most financial institutions and lenders on the market today offer this form of mortgage.

Buy to let mortgages are usually more expensive than a normal mortgage, you don’t pay anything for each month the property is bought but you pay the total amount of money after the agreed period of time. This kind of mortgage requires up to 40% deposit of the total property value.

There are generally something that a financial institution will consider before awarding a mortgage

1.Age: Usually you will not be awarded a mortgage if you will be over the age limit when the mortgage ends. Most financial institutions that give out mortgages do not give out to people who will be over 70 or 75 years old at the end of their mortgage

2.Credit score and debts: generally, your mortgage will be granted only if you have a yearly income of at least £25,000, most financial institutions have that as a set rate, with a lower credit score or a lot of debts, you are not likely to get your mortgage approved

3.You are willing to take the risk: every investment is a risk, if you are willing to take that risk then you can take consider taking a buy to let mortgage

4.If you already have a house: buy to let mortgages are usually given to people who already have houses. The fact that it’s a mortgage house doesn’t matter

5.You want to purchase flats or houses: buying a to let mortgages is usually done by those who wish to invest in houses or a group of flats.

Difference between buy to let mortgages and an ordinary mortgage

1.Buy to let mortgages are usually paid once, they aren’t paid each month like an ordinary mortgage. The total amount Is paid after the agreed mortgage period

2.It is usually more expensive, it is said to be about 1% more expensive than a normal mortgage because banks and financial institutions consider it more risky

3.The first deposit usually ranges from 20-40% of the total property value. Although it is mostly around 25%, or 75% loan to value.

How much you can get from applying for a buy to let mortgage typically depends on the total rent amount you hope to receive on the property. Most financial institutions don’t give buy to let mortgages unless the rent is at least 25% higher than the mortgage rate.

Things to consider

Most Financial institutions offer buy to let mortgage. There are brokers that can be consulted when trying to get a uy to let’. They are usually experts in the field and are more suited to give advice when it comes to buying a mortgage.

You should consider the rainy day when getting a uy to let’, have a financial back up plan for when the house is unoccupied during your mortgage period, this should typically not be selling the property

It is also important to compare prices as interest rates are not constant, they might differ from bank to bank or financial institutions and you might be able to get lower interest rates from more indept researches

What is a second charge mortgage?

An increasing number of UK residents are using second charge mortgages as a way to raise large sums of cash. But what exactly are second mortgages and how do they work?

Essentially a second mortgage is a subordinate mortgage of the already existing mortgage or loan and it is against the same property, not another property. Some people avail of them in order to sort out other debts, whereas others may use them to raise finance for improvements to their home or to buy another property.

Common Reasons to Use Second Mortgages

They can be used to pay off items such as university fees, or the cost of a wedding for example.

You need to make some improvements to an existing property, or maybe you need to have some repairs done.

You have a credit card and other unsecured loans which could be consolidated to make them easier to pay off.

You have decided to purchase a 2nd home either as a pure investment or for holiday use.

You wish to invest in big-ticket items such as a car, caravan, motorhome or motorbike etc.

Second Mortgages-How to They Work?

Before applying the foremost important consideration will be the amount of equity you have in your home. This and the amount left to pay on the current mortgage will be taken into consideration.

The rule of thumb is generally that a 2nd mortgage lender will offer to loan you 75% to 80% of the value of your property and this is then subtracted the existing outstanding mortgage amount.

Typical Term and Interest Rates of 2nd Mortgages

Anywhere between 3 and 25 years can be the typical term of second mortgages. However, be warned that the second mortgage interest rates will be higher than the existing mortgage. This is due to the fact that they lie in a higher risk category.

They are in a higher risk category because if you were to default on payments then the first mortgage lender would get their money before the second mortgage lender, and these can be two different entities.

Second mortgage interest rates depend on a variety of factors. The most important criteria are the lender’s assessment on the loan to value of the property and your existing credit rating.

However even taking this into account second mortgage interest rates will be lower than unsecured loans. This and other factors pertaining to your own situation can mean that second mortgages can be a viable and sensible financial solution under certain circumstances.

A second home loan ought not to be mistaken for a home refinance or re-mortgage. When you renegotiate your first home loan you are supplanting your old loan with another credit, normally at a better interest rate. A home equity loan or second mortgage is another loan notwithstanding the primary loan, which will result in two regularly scheduled instalments. It is vital to recognize the two to ensure that two instalments won’t truly affect your monthly spending plan.

Getting a second charge mortgage can be a decent method to utilize the value in your home to do any number of things.

What Does A Mortgage Broker Do?

Buying a home is one of the biggest and most important investments that most people will make in their lives. There are many things involved in buying a home, such as: For example, a real estate salesman who can help you find your own home, fix your finances, and get approval for a mortgage. Many home buyers may just assume that they should only look at their bank for a mortgage for a new house, but they may not know that they are resigned to what the bank wants or can offer them. Using a mortgage broker is the best option when it comes to getting a mortgage that suits your individual needs, as well as getting the best terms and the lowest interest rate!

Professional independent mortgage brokers understand the specific needs of their clients. They will ask many questions and really get to know their customers before they start looking for the perfect mortgage. A certified mortgage expert has the knowledge and expertise to determine the best mortgage for their clients, including the lowest possible interest rate.

Whether it’s the homebuyer’s first home or the third home, finding the right mortgage, terms, and conditions is crucial. Before buying a home, prior approval is the first step. Independent mortgage brokers help you in every way to finance the house you are planning. They will do their best to secure your home ownership. The conditions are comfortable for you, so you know what to expect in terms of transportation and closure costs, and that you can buy a home with confidence.

What is a mortgage broker?

A mortgage broker is an independent, licensed expert who specializes in finding the perfect mortgage for clients. He or she has a list of approved lenders with whom they regularly contact and have relationships. For this reason, they can often quickly secure a mortgage for a customer, depending on the customer’s financial and credit situation. The mortgage broker acts as an intermediary for the capital resources that the client needs and that the lender is willing to provide at a specific interest rate and terms and conditions.

With direct access to so many lenders (from large banks to private lenders), the mortgage broker can provide the customer with the fastest, most efficient, and most money-efficient service option, provided they get a mortgage. The fact that the customer does not pay for the services of the mortgage broker is really a fantastic option for the client. You can be sure they work for you, not the bank or the bank.

How does a mortgage broker save time and money?

An intelligent consumer typically looks for a particular product that interests him and compares prices before buying. Shopping for a mortgage is essentially the same. You want to be able to see what rates and conditions different institutions and lenders can offer you before you make the final decision about the mortgage for your new home.

Shopping around is very time consuming and sometimes makes no sense to someone who does not have the knowledge and experience of a mortgage broker. Why do not you leave the purchase to the mortgage broker , which saves you a lot of time? Not only that but at the end of the day, mortgage broker will also save you money by offering you the best possible interest rate so you can invest more equity in your home faster. You have access to products that are not available to the public. In addition, you only need to complete a mortgage application and obtain a credit report, which is then purchased from all lenders. Best of all, the service does not cost you anything!

What is a fixed rate mortgage

With a fixed rate mortgage, the interest rate, and thus your monthly payment, remains the same for a specific period. After the period for which your mortgage rate is fixed, your mortgage payments will become variable unless you arrange another fixed-rate deal.

Advantages of fixed rate mortgages

Peace of mind – you know exactly how much you will pay each month, making it easier to budget.

You won’t need to worry about payment increases caused by interest rate volatility during the specified period in which your rate is fixed.

Disadvantages of fixed rate mortgages

If interest rates drop below your mortgage rate, your mortgage payments won’t fall.
Early repayment may incur significant charges.
Factors to consider when taking out a fixed rate mortgage
Length of the fixed rate period

Fixed rate periods vary from several months to 20+ years. Typically, longer durations mean higher interest rates and higher early repayment charges.

If you believe that the base rate might fall, you may want to choose a mortgage with a short fixed rate term. However, if you think that base rate will increase or remain volatile, you might want to choose a mortgage with a longer fixed rate term.

Fees & charges

Lenders may charge an arrangement fee, which can sometimes be added to the mortgage balance. If you are switching providers to save money, high fees might negate much of this saving.

On the plus side, if you are switching to a new provider, they might pay some of the associated costs, such as legal and valuation fees.

If you pay your mortgage off before the end of the fixed term period, some lenders will impose a ‘redemption tie-in’ (early repayment charge). This is usually a percentage of the remaining balance, and the amount that you would need to pay may decrease each year that you stay on your mortgage. Sometimes discounted fixed rate mortgages are subject to extended tie-ins, where a penalty is imposed even after the fixed rate period has ended.

Flexibility

Sometimes, depending on your financial circumstances, you might wish to overpay or underpay your mortgage for a few months, or even take a payment holiday. If the flexibility to do this is important to you, make sure that you choose a fixed rate mortgage that allows this.

Portability

Make sure that you can transfer the mortgage to a new property if you move house before the fixed rate period expires.

After a fixed interest rate

Also, quite often after a period on a fixed mortgage, you have to move to your lender’s standard variable rate. Again, this is a way of them making more money out of you and there is usually a decreasing penalty as you near the end of the standard variable rate that follows.

Who is a fixed mortgage for?

Who would typically choose to fix the rate of their mortgage? Well, those people to whom the financial security of knowing how much they will be spending on their mortgage each month is worth more than potentially saving some money if interest rates drop. You are sacrificing future possible savings for the security of knowing that your payments are affordable.

So, if you do not mind if your mortgage may not be as cheap as it could be in the future but want the security of easy budgeting, talk to your financial advisor about a fixed rate mortgage and the benefits it might have for you.

Secured loans explained

 

Leading secured loan rates of 3.65%
Leading secured loan rates of 3.65%

Secured loans can be used to describe all those types of loans that can be obtained by a financially needy individual on the condition that they provide the lender with some sort of collateral against the loan as a security. The collateral can be the borrower’s car, home, or any other valuable property that would also help in determining the amount that would be sanctioned in the form of a loan. Furthermore, the collateral provides the lender with security in the sense that now they have a guarantee that the borrower would make timely repayments of the loan. In the case where the borrower fails to meet the repayment terms accordingly or does some sort of default or fraud, the lender will have the right to liquidate the asset put as collateral so as to get back his payments without getting pulled into some sort of dispute with the borrower.

Types of Secured Loans

There are many types of secured loans. At the basic level that applies to all situations, these are loans secured by some form of collateral. They have many uses and options for collateral, which is how there came to be so many different kinds for all the different circumstances.

The most common form of collateral is real estate. This is typically done as a second mortgage and is the only type of secured loan banks are known for doing. You can go on living in your home as normal but sign a note stating that if you fail to make your payments your home will be repossessed and sold to make up the borrowed amount.

Other common collateral options include vehicles, which you can also go on using as normal, or jewellery and other collectibles of value. In this case, the item will usually be held by the lender in a safe until you have finished making your payments.

Another common type of secured loan is debt consolidation. In this case, you are borrowing from one source and using that money to pay off all your other debts. This has the advantage of one monthly payment, and the goal is to obtain a lower interest rate than you are currently paying. Starting over like this also gets any creditors that are currently bothering you off your back. You can use any form of collateral, but as I said above, real estate is the most common.

When you enter into this kind of agreement you are lowering the risk for the lender that you will not pay them back by offering the collateral. Due to this lowered risk, you will be offered lower interest rates and more flexible terms than you would be otherwise.

You can borrow money for all sorts of purposes- home improvement, tuition, car loans, or any other reason. Be sure to search around and find the lowest interest rate possible and look at the types of secured loans that will work out for you.

Many benefits of secured loans.

• The interest rates of lower
• The time period given is long
• The tension to pay back is less as you don’t have to hurry
• You don’t have any tension of negative legal action if you become unable to pay back
• Your asset can still be used by you while you are paying the instalments of the loan
• Your credit score becomes good because secured loans have more credit points