FAQs About Buy to Let Mortgages
If you are interested in pursuing the application for a buy to let mortgage, you may have various questions you need the answer to. In the following post, we want to address the most frequently asked of these questions.
How Much of a Deposit is Needed?
For any mortgage, buy to let included, the bigger the deposit you can put down the better deal you will receive. As a general rule of thumb, you will need to save a deposit of at least 25% or even more, though there some mortgage companies who need just 15%, as long as the income from the rental prices is enough.
How Much Can You Get With a Buy to Let Mortgage?
Buy to let mortgages differ from standard residential ones, in that the amount you are allowed to borrow is not based on your income and outgoings, but instead the income generated from rent of the property you are looking to buy. Most lenders will look for the income from rent to be around 125% of the repayments for the mortgage. This means you need to generate rent of £1,000 every month for mortgages with £800 monthly repayments.
Generally, lenders require that customers have an income too.
Do you Need to Have an Official Tenancy Agreement?
In general, if you are renting a property to tenants as their home, you are performing the role of a private landlord and will need an AST or Assured Shorthold Tenancy. Buy to let mortgage lenders will insist you arrange an AST and will want to see a copy of it.
Can First-Time Buyers But Buy to Let Properties?
Yes. However, there may be limitations with regards to the mortgager you can get. The first thing you need ask is, are you a first-time buyer or first-time landlord? This is a crucial point, as most lenders require you own your own properly, for 6 months at the very least, before they can offer you a mortgage for a buy to let property. However, some mortgage companies require that you just own property, meaning you could live in your own rented accommodation but already own a buy to let property. Your mortgage options will definitely be limited if you are a complete first-time buyer.
Are There Types of Property More Difficult to Get Buy to Let Mortgages For?
In a similar way to you researching and choosing the property that suits you best for renting out to tenants, mortgage companies will spend time researching and assessing whether properties are safe for lending against.
Generally, lenders will make their decisions based on the type of property, its condition and location. However, there are general restrictions that most follow for certain property types, including:
- Holiday homes
- Flats located above commercial properties like offices, shops and restaurants
- High-rise flats
- Ex-local authority properties
- New-build flats
What Does House in Multiple Occupation Mean?
If you are interested in owning a property to rent out to various tenants who are not living together, this kind of property is normally referred to as being an HMO or Home in Multiple Occupation. It only makes this classification if there are 3 tenants living there living in their own ‘households’ with a shared kitchen, bathroom and toilet.
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