If you are considering going into the business of property investments, you will need a buy-to-let mortgage. Many current investors already know that the market has shrunk significantly in the past few years.
Nevertheless, there are still some attractive mortgages rates out there. The trick to finding them is comparing a number of good rates and choosing by elimination, and according to your preferences.
Note that your home may be repossessed if you do not keep up with regular repayments on your mortgage. It is therefore essential to choose wisely and within your finances. You should also familiarise yourself with the latest changes in mortgage interest tax relief if you are a new landlord.
Guide to buying the right buy-to-let mortgage
Low returns on savings accounts and an unstable stock market have driven up the attraction towards the buy-to-let property market as an alternative investment. Rental property owners in the UK are also experiencing an increasing demand from rent seekers who are finding it hard to buy their first home during this period. This has driven up the competition for mortgage rates in the buy-to-let sector.
Mortgages for rental property owners
The mortgage is one of the most important things to consider if you are thinking of buying a property to let. Since you cannot take out a standard residential mortgage backed loan, many building societies and banks offer buy-to-let mortgages, especially designed for landlords. The first step would be to list the various institutions that offer mortgages for buy-to-let and seek out the best terms for your capital.
Larger deposits for buy-to-let
A buy to let mortgage is quite similar to a standard residential loan in several ways. However, there are a few major differences. The interest rate is usually higher and many lenders will request a bigger deposit on a buy-to-let house. The norm is a minimum of 25%, though many good deals ask for 40% or higher.
The variability of buy-to-let mortgage rates
There is a significant variation in the value of mortgage rates across lending institutions. Building societies and banks will work out your personal income when determining how much they can avail to you as a residential loan. But with a buy-to-let mortgage, they review your expected rental ROI. They also consider the mortgage risk of the particular building and how much you are willing to deposit. Mortgages rates for buy-to-let properties are often higher than residential rates.
Finding the best buy-to-let mortgage deals
In order to choose a worthwhile buy-to-let mortgage, it is advisable to know how much a mortgage would cost you if you kept it for the whole tenure. The Annual Percentage Rate of Change or APRC will give you an idea. Take account of the following:
- Introductory rate
- Main rate
There are many ways for prospective landlords to compare buy-to-let mortgage deals in the market. From Comparethemarket.com to Money Supermarket and Go Compare, these websites may not help you find the ideal tenant, but give you options for the ideal mortgage.
Home loans are tricky because they provide much needed money, but they also require regular repayment. In the case of a reverse mortgage, such regular payments are not necessary. You can repay the money you borrow at a much later date. During the examination of reverse mortgage pros and cons you will discover another benefit, which is that you cannot easily default on the loan. Therefore, you will not be in any danger of losing your home. However, if you pass away or voluntarily leave the property then you or your heirs will immediately owe the balance. Paying the balance to your reverse loan lender at that time is optional, but if it goes unpaid then the property will be sold and the lender will keep the proceeds. Any additional money beyond the loan balance will be given to you or your heirs.