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