When it comes to mortgages, buy-to-let rates are typically higher than residential mortgages. This is because banks consider tenants to pose a greater risk than occupying landlords. This week, it was reported that the average homeowner who pays taxes with higher rates and who remortgaged last month could expect their annual net profit to plummet from 3,198 to 884 pounds sterling, representing a decrease of 72% compared to last year due to rising rates. If you don't want to be automatically transferred to the SVR of your current lender, you should start thinking about remortgaging to buy-to-rent up to six months before your current offer ends.
A fixed-rate mortgage can give you the certainty that your payments are fixed for a period of time. As with a standard mortgage, the buy-to-rent mortgage rate you pay will be determined based on a combination of factors, such as the size of the mortgage, the amount of the deposit you have, and the type of buy-to-rent mortgage product you choose. As with applying for a standard mortgage, a buy-to-rent mortgage lender will want to see proof of your identity and address, proof of your work income and other income, and the details of any outstanding loans and debts you have in your name. The size of your deposit and your financial situation will influence the determination of how much a buy-to-rent mortgage lender is willing to allow you to borrow.
In addition to the general criteria that all mortgage lenders require, such as having a good credit score and being within the lender's age limits, you'll normally need a minimum deposit of 25% to apply for a buy-to-rent mortgage. At this time, or sooner if you prefer, the landlord could re-mortgage with a standard buy-to-rent mortgage. Lenders have also begun to tighten stress tests, and some demand that rental income cover 140% of mortgage payments with stress rates of up to 8.49%. A buy-to-rent mortgage is a great way to realize your real estate investment aspirations, but there are also a lot of things to consider. The firm added that the increase in the costs of new mortgages meant that a typical homeowner who bought a 222,000 pound rental purchase last year “will likely see their annual interest-only mortgage payments nearly double, going from 3,010 to 5,903 pounds sterling if they remortgaged last month. A subtype of variable-rate mortgage is the follow-up mortgage, in which the rate you pay follows the path of the Bank of England's base rate. This is mainly due to the additional risk that lenders who buy to rent pose by landlords not being able to meet repayments if tenants are late in paying rent or if the property remains unoccupied for an extended period. When it comes down to it, buy-to-let mortgages are more expensive than residential mortgages due to lenders perceiving tenants as posing greater risk than occupying landlords.
This means that homeowners who remortgage last month could expect their annual net profit to drop significantly compared to last year due to rising rates. To apply for a buy-to-rent mortgage, you'll need proof of identity and address, proof of work income and other income, details of any outstanding loans and debts in your name, and a minimum deposit of 25%.It's important to remember that when considering a buy-to-rent mortgage there are many factors at play such as size of the mortgage, amount of deposit you have and type of product chosen. Lenders have also begun tightening stress tests which means rental income must cover 140% of mortgage payments with stress rates up to 8.49%. Ultimately, if you're looking into investing in real estate through buying property then it's worth considering taking out a buy-to-let mortgage.