Buy To Let Mortgages
If you’re looking to become a landlord and want to get on the property ladder, a Buy-To-Let mortgages may be your best bet. It is designed for those who want to buy a property with the intent of renting it out. Generally the differences are that there are higher deposits and interest rates. You can then have your chance to appeal to the market of people looking to move home.
The interest rates depend on the type of mortgage that you’re on and what kind of rent you expect to bring in:
- Discount-variable mortgage – This is where a discount is applied to a mortgage where the rate is variable. As the mortgage rate fluctuates, so too does the discount percentage.
- Fixed-rate mortgage – Where, as the name suggests, the rate of repayment is constant. The length of the term will generally affect what the rate is, with longer repayment periods having higher rates.
- Tracker mortgages – This mortgage actually takes it’s basis from the Bank of England base rate. The rate is set as a percentage above this base rate. In this sense, it’s almost the opposite of the discount-variable mortgage as that takes no bearing from the Bank of England.
Features and Benefits
- Mortgages for those looking to rent out properties.
- Deposits typically between 25 and 40%.
- As of January 2020, the average value for a buy-to-let property was £165,247.
- Most Buy to Let mortgages are preferred to be interest only.
- Buy To Let mortgage purchasers are entitled to 20% credit on their interest payments.
- These mortgages tend to be more expensive due to the higher risk involved.
What else do I need to know?
– Buy To Let mortgages are not limited to experienced buyers as first time buyers can receive them too. You may find it harder to actually receive a mortgage though as some indication of experience or aptitude would be desired.
– These mortgages are not necessarily cheaper than an ordinary mortgage. The average lower annual rates are offset by the fact that a larger up-front deposit is usually required.
– It is actually possible to switch your existing mortgage into a buy-to-let mortgage. If you are thinking of starting off a journey in property buying and selling, that may be an option.
– If you are considering a buy-to-let mortgage, don’t forget that there are additional costs associated with becoming a landlord. You will need to think about stamp duty (there is a 3% fee to pay on buy-to-let mortgages), maintenance costs and letting agency fees.
– Getting a buy-to-let mortgage can be a difficult time in terms of balancing finances. The end game is to move tenants into the property but as you have no guarantee of when or if that will happen, you’ll need to have contingency plans for the worst case scenarios.
This is a tougher time for Buy To Let Mortgages currently due to the ongoing global situation, but many benefits remain. Because of the projected eventual end the current status, there is a surge in the purchasing of such mortgages. This will line up a host of landlords to be ready for when people are once again able to use their own funds freely.