When you are looking for your buy to let mortgage you have a lot of decisions to make – especially if it’s your first time. So it’s really sensible to start off by seeking buy to let mortgage advice, rather than just diving in and hoping for the best. Look for a mortgage broker who is a specialist in buy to let.
So what are the possible reasons you may need buy to let mortgage advice?
Each buy to let lender has its own individual ways of working out how much to lend you. The decision is usually based wholly or partly on the potential rental yield or potential market – this may be estimated by the surveyor when checking the property. Most lenders will look for the potential monthly rent to be up to 130% of the monthly mortgage payment – this helps to provide a hedge against void periods and other expenses. Some also want an annual yield of at least 8% of the mortgage amount. You need to choose your lender carefully to get the best deal.
Even if you are hedging against additional costs, you do need to be very clear as to what these additional costs might be. If you do not live very close to the property, you would be well advised to use a letting agent as problems can arise at any time of the day or night – agents usually charge about 10% of the monthly rent. Other costs include property maintenance, buildings and contents insurance, and legal insurance to cover costs of evicting tenants or in case a tenant is injured on the premises and sues you. A specialist adviser will help you calculate the exact costs – if you don’t budget for them, you won’t make a profit.
When arranging your buy to let mortgage, you need to try to set the level of your repayments so that you can afford them if there is an interest rate rise. Many buy to let investors choose interest only mortgages or 2-3 year fixed-rate deals. Of course, with interest only deals, the payments are lower but the capital is still outstanding at the end of the term. This is more suitable for you if you aim to continue building your portfolio – it enables you to re-gear your property capital in order to increase the number of your properties. A repayment mortgage may be more suitable for you if you are using the property as an alternative pension plan. You really need to obtain buy to let mortgage advice before deciding which kind of mortgage to go for.
Buy to let mortgage advice is important – in fact it can make all the difference to your success or failure. You should remember it is not regulated by the Financial Services Authority in the same way as other mortgage advice. Nevertheless, your buy to let mortgage adviser will want to build up trust and an ongoing relationship with you, so you have every reason to expect the adviser to put your interests first, just as any other adviser would do.
