Buy to Let Mortgage
Many people are aware they require a mortgage but done really know how it works, there are criteria’s which must be met in order to obtain a buy to let mortgage.
Generally in order to obtain a Buy to let mortgage you will need to be purchasing a flat or a house for investment purpose and not for yourself to reside in, you should also have a good level of financial stability which the lender will look at in order to keep up of mortgage payments.
Criteria for Buy to Let Mortgages
- Are already a homeowner
- Earn over £25,000
- Have a good credit record
- You will be younger than 70 years old when mortgage term ends.
- The property should be completed
Borrowing for a Buy to Let Mortgage
In most instance’s enders require the buyer to put down a deposit of 25%, although this can vary between 20-40%, this is different compared to only 5% which is needed by lenders of a regular property.
Lenders can make exceptions depending on your personal circumstances, in most cases you would only be able to borrow a maximum of 75% of the property price.
Tax Relief on Buy to Let Mortgages
As legislation laws change many alterations have been made to tax relief on buy to let mortgages and it’s important to always seek advice from your lender or financial adviser in order to stay in the known.
A reduction in the tax relief you can receive will be rolled out nationally by this year: 2020.
A rate of 20% will be in action for any landlords with buy to let who will have to pay tax on the full amount of rental income received on a property. This makes a change from the previous tax relief laws that permitted landlords to pay tax solely on rental income before mortgage expenses and interest deductions (known as NET rental income).
Higher Interest Rates
Interest rates tend to be higher, with many buy to let mortgages being interest-only. Meaning you don’t have to pay the interest every month, but you must pay in full when the mortgage term has come to an end.
An ideal approach for long term investments, its positive features include the preservation of cash ﬂow throughout the duration of the mortgage which allows investors to expand their portfolio further.
However, your individual investment strategy will determine whether you take this interest only path or opt for a repayment plan. This would entail owing monthly repayments with interest payments on top. A plan like these suits those who want to keep their portfolio of properties to a minimum and gives peace of mind that the mortgage will be paid off in full at the end of its term.
With the pound at a low, a stable economy, and a shortage of quality rental accommodation, the UK is a great market for overseas investors.
While buy-to-let mortgages rates have traditionally been more expensive for overseas buyers, the recent rise of over sea’s landlord’s this has seen lenders expanding their products of overseas and ex-pat options with much better interest rates, terms and arrangement fees.
If you are one of the almost four million British people living abroad, you may need to go through stricter identity checks than if you were still residing in the UK.
If you already have a mortgage product in the UK and wish to borrow more than £100,000 or work for a corporation with a salary of £40,000 equivalent in GBP paid in US Dollars or Euros then you may have more options.
Where to obtain a Buy to Let Mortgage product?
Banks and building societies will offer buy-to-let mortgages, as well as some specialist lenders. It’s often a good idea to speak to a mortgage broker as they’ll have access to a wide range of options from across different lenders and therefore are able to offer personalised recommendations and usually handle all the paperwork for you.
Our after sales team will guide you through all of this and help you along the way.
Our Top Tip’s – Weigh up your Buy to Let Options
Now that you understand more about buy to let mortgages and the criteria you need to meet to use them, you should weigh up the pros and cons of this investment method. If you want to invest in an off-plan property to benefit from the lower rates, higher capital growth and modern, new-build design, you should consider paying for your investment upfront.
Here at Opulence Invest we have a range of affordable off-plan investment properties in high-growth areas for you to explore.