Which is the best buy to let mortgage?

Looking for the cheapest buy to let mortgage may not be as easy as you would think, taking into account fees, rates and minimum rentals. Speaking to a financial adviser before embarking on becoming a landlord is certainly worth a call, as there maybe alternatives investments that you may not have considered.

What is a buy to let mortgage?

If you would like to buy a property as an investment and have the intention of not living there and collecting rent, then you will not be able to fund the purchase through a conventional mortgage. Instead, you will need a specialist type of mortgage, known as buy to let mortgage.

Most buy to let mortgages are interest only, meaning that you will only pay the interest each month and none of the capital. Whilst this helps to keep repayments low, you will need to have a plan in place to repay the balance at the end of the term. Some people choose to put the rent money away each month to pay off the loan at the end of the term, whereas others may simply sell the property to cover the cost.

Like all mortgages, buy to let mortgages come with varying terms and rates, so it is really important that you find the best deal, as it could save you thousands of pounds over the years.

How much will a buy to let mortgage cost?

The cost of your buy to let mortgage will vary depending on your circumstances. Some of the factors which contribute to the cost of your mortgage are:

• Minimum Deposits for buy to let mortgages are typically higher than residential mortgages, usually at least 25% of the value of the property, but they can also be up to 40%. Like all mortgages, the bigger your deposit, the less you will need to borrow.
• The interest rate you pay will play a big part in how much your buy to let mortgage costs. As we mentioned earlier, buy to let mortgages are usually interest only and so the capital will not be repaid throughout the term.
• The term of the mortgage will determine how much interest you will pay overall.
• Rent A lender may require the rental to be between 125% of the interest to circa 145%.

Can anyone get a buy to let mortgage?

Lenders usually look for the following criteria to be met before accepting a buy to let mortgage application:

• Credit history: a good credit score will mean that you are more likely to be accepted
• Income: some lenders set a minimum income threshold before accepting you for a buy to let mortgage and you’ll need to earn around £25,000
• Age: the majority of lenders will need you to be at least 21 years of age
• Deposit: typically, a 25% deposit will be required, although it could be more.

Things to consider before getting a buy to let mortgage

Before you apply for a buy to let mortgage, there are a number of things that you should consider carefully before doing so:

• The loan term is a vital decision to be made. You should think about the possibility of there being times when the property is empty and not receiving a rental income. This could impact you being able to pay back the loan at the end of the term so you should have a plan in place if this happens.
• There are also tax implications on both rental income and when you sell the property, which can be complex. It is important that you are aware of and understand these implications before taking out a buy to let mortgage.

Woodward Financials were awarded best wealth management firm in 2021 and again in 2022 and have a team of mortgage advisers ready to help you answer these questions and guide you through the right buy to let mortgage for you.

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