Bearing similarities to home mortgages, they too are secured against the property. Due to the inherent risks of this type of loan, lenders rates are typically lower than a standard loan. Typically lenders look for a larger deposit than residential mortgages, of at least 15% and a rental income that covers the mortgage and 20-30% excess.
So what type of buy to let mortgage will suit you best:
Fixed Rate mortgages offer the comfort of guaranteed outgoings for the duration of the fixed period. This allows you to plan your income/expenses with greater confidence and gives you budgetary certainty. On the downside, fixed rate mortgages often have early redemption penalties to 'tie in' clauses that restrict your ability to re-mortgage for further investments.
Variable Rate mortgages offer you the greatest flexibility and maximum benefit if interest rates drop. They also tend to offer some of the most competitive rates in the market with the highest Loan to Value rates (LTV).
Capped rates perform like variable rates below an agreed interest rate, but perform like a fixed rate if interest rates rise above the fixed level.
A minimum status mortgage is appropriate if you are unable to meet all the criteria of the standard variable rate mortgages. Hence, you meet a 'minimum' set of criteria for the lender. The effect of accepting 'minimum criteria' for a lender is that their perceived risk is great and hence, they will charge higher interest rates or set up charges to compensate.
A number of investors set up Limited Companies for tax reasons. As a result, any loans taken out need to be offered to the Limited Company and the arrangements for securing the loans are handled differently, plus the structure of the mortgages vary too.
Non Resident mortgages are appropriate for either UK ex pats or Non UK nationals investing in the UK market.
Your strategy will also determine the right type of loan to purchase. Buy to let loans are appropriate to landlords looking to hold onto the property for the long-term but in certain cases they work equally well with landlords/developers looking to refurbish or sell the property. If your strategy is the latter, you should clarify whether the loan can be repaid in advance without a significant penalty.
If you’re ready to get a quote – without any obligation – then go to our quote centre. If you would prefer to discuss the case in more depth first, please do not hesitate to get in touch.