Buy-to-let mortgages are typically more expensive than residential mortgages, with the difference being around one percentage point. This is because banks consider tenants to pose a greater risk than occupying landlords. While buy-to-let mortgages can be a great investment, they may not be suitable for everyone. Before you decide to get a buy-to-let mortgage, there are some important things to consider.
When you end your interest-only mortgage agreement, you are expected to pay the cost of the property at the time you purchased it. Most people do this by selling the property. This is where most homeowners get their benefits, although it's not always that simple. If home prices have fallen since you bought the property and the current value of the home is lower than it was when you bought it, you will have losses and will need to cover the rest with your own money.
Like residential home loans, buy-to-let mortgages can be fixed-rate, follow-up, or discounted agreements, and there are also commercial buy-to-let mortgages for homeowners who want to invest in commercial properties. There will almost certainly be “gaps” when the property is unoccupied or rent is not paid, and you'll need a financial “cushion” to meet your mortgage payments. When looking for a buy-to-let mortgage lender, you should look for one with no minimum income requirements when it comes to personal earnings. Most lenders like to see a projected rental return of at least 125% before offering a BTL mortgage, and they will assess if a property meets this requirement by performing a stress test.
The initial consultation with your buy-to-let mortgage agent will be free of charge and you will have no obligation to continue, but if you decide to continue, they will guide you through the application process from here. Many lenders consider that a buy-to-let mortgage represents a greater risk, so you may need to meet certain conditions in order to apply for it. Consumer BTL mortgage counseling, organization, lending and management are covered by the same laws as residential mortgages and are regulated by the Financial Conduct Authority (FCA). We'll connect you with a real human being who's an expert in your circumstances with a proven track record of finding winning mortgages.
Talking to a buy-to-let mortgage specialist before you apply will increase your chances of finding the right lender the first time, and that could mean saving time and money. Some brokers charge 0 pounds sterling, others up to 4% of the loan amount to process the mortgage on your behalf. To get a buy-to-let mortgage, you'll need to show that the rental income will pay your mortgage interest by at least 125%.