Capital Commercial Finance Group UK

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Buy To Let Mortgages

FREE EXPERT ADVICE GIVEN ON ALL COMMERCIAL FINANCIAL PRODUCTS

Buy To Let Mortgages

This type of mortgage allows you to let out residential or commercial property and take the rent as income. Some investors stick with one rental property while others expand their portfolio and even become full-time property investors. This lucrative investment type is by no means simple, but it can put you on the path to lifelong financial security.

Buy to let mortgages can be more complicated and harder to secure than residential mortgages. There’s no need for this to put you off though. With the right information, you can make a buy to let mortgage work for you.

The saying ‘safe as houses’ might not be as strong as it was during previous generations but there’s no mistaking it, property is still one of the best investments you can make.

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What Are Buy To Let Mortgages?

A buy to let mortgage is a type of commercial mortgage for a property that you will not be living in. It is called a commercial mortgage even if it’s over a residential property, so long as you are not the resident. This is because the property is a commercial endeavour to you, the mortgagor.

Buy to let mortgages are for any property you intend to let out including residential and commercial property such as shops or industrial units.

If you intend on living in the property first and may let it out in the future, you will most likely need a traditional residential mortgage instead. However, you will have to let your mortgage lender know if you want to rent your property and they may not allow the change of use.

Individuals or limited liability companies can take out buy to let mortgages.

How Do Buy To Let Mortgages Differ From Traditional Mortgages?

There are several important differences between traditional mortgages and buy to let. As even tiny differences can add up over the years, it’s crucial you pay attention to the smallest of details.

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Interest-Only

The majority of landlords opt for an interest-only mortgage which is the opposite of a typical residential mortgage. With a residential mortgage, your aim as a homeowner is to pay back the cost of your house over the mortgage terms.

With a buy to let mortgage, many landlords will use the rental income to pay the interest and look at selling the house in the distant future at a profit. Buy to let properties are long-term investments and work well if held for a considerable amount of time as you won’t be paying off the capital amount.

Interest rates are low at the moment but buy to let interests rates are usually higher than those for residential mortgages. This is because lenders see rental income as riskier than mortgage repayments from owner-occupiers. If you think about it, this is understandable.

A tenant can move out more or less whenever they choose. This could leave the property unoccupied and the owner struggling to re-let it, losing the income. In contrast, if an owner is residing in the property, they have a vested interest at keeping a roof over their head.

Rental Income Contingent

The lender calculates traditional mortgages by the amount they think you can afford but a buy to let mortgage is usually calculated based on rental income.

Lenders want proof that the rent you’ll receive will more than cover the mortgage repayments each month as well as maintenance costs on the property. Most lenders will also require you to have personal income in addition.

Larger Deposit

You can sometimes get a residential mortgage with as little as a 5% deposit but it’s not the same story for buy to let.
For a buy to let mortgage, the bigger the deposit the better, with many lenders requiring at least a 25% deposit. Again, this is because this type of mortgage is riskier than a traditional mortgage.

If you’re looking to get a buy to let mortgage for the first time, you’ll most probably have to already own your own home and have an excellent record of repaying your mortgage. Some lenders will consider first time buyers if you meet other criteria and can prove significant savings to cover rental income issues.

The buy to let mortgage industry responds to the economy so using a professional commercial mortgage broker is the best way to get up-to-date advice on your buy to let mortgage application. As they differ from traditional mortgages, We as a broker can steer you past offers that will cost you dearly and find you the best possible mortgages for your circumstances.

To find out how we can help you give us a call on 020 3576 3620 or email us on info@cfguk.co.uk