Although buy to let mortgages are harder to get now than they used to be before the credit crunch, there are still enough options to get around. Still, lenders now put under scrutiny all requests for such mortgages, and only the most realistic requests are accepted.
These kinds of mortgages are essentially different from other mortgages in that for them the lender considers how much you will earn from the rented property the primary source of income. In addition, some lenders may also take into account your personal income.
In most cases, lenders ask for a prospective rental income that amounts to 125% or more of the monthly interest paid for the loan. To verify this, lenders typically rely on independent sources to carry out the necessary investigations. The interest rate for the loan is often based on the standard variable rate (plus 1% or more) of the lender. Lenders also request that the borrowers put down 30% or more of the intended value of the mortgage they demand.
Basic borrowing tips:
- Lenders don't usually lend more than £1m for a single property.
- It's not recommended to request buy to let mortgages while you have an existing mortgage for your own house – this may reduce the value of the highest loan you can get.
- Lenders set a limit as to how many mortgages you can get.
- The more you put down (40%+), the better the rate you get.
An advantageous fixed rate deal comes with a high loan fee, such as 2.5% of the amount borrowed. Sometimes, this fee makes a high interest rate deal (which doesn't feature this fee), a better choice.