Choosing the right Buy To Let (BTL) mortgages

Choosing the right Buy To Let (BTL) mortgages

People often talk about “bricks and mortar” as a secure investment and increasingly more people are adding renting out those properties as a way of generating income. However, when buying a buy to let (BTL) property it is also important that you have a suitable mortgage. Here are some tips on what to look for when choosing BTL mortgages.

Payment

BTL mortgages work on an interest-only basis, meaning that you only pay off the interest per month. While this can be good when budgeting every month, the risk is that in the event of any issues you could face having to pay the whole loan or negotiate a refinancing.

Another major difference is the deposit. While it is possible to put down a 5 per cent deposit to secure a residential property, a BTL mortgage will usually be between 20 to 25 per cent of the property. Before the COVID outbreak, there were some 15 per cent offers available but these are less likely now due to the increased risks involved.

However, deals are available if you are prepared to put down a larger deposit of 40 per cent or more. While this will be a factor in any mortgage deal, a lender will also look at your property portfolio (if you have one) as well as any previous history involving BTL properties (most importantly, whether or not mortgages were paid off with said properties.)

It is important to note that if you have four properties or more then you are considered a “portfolio landlord” and this may make it more difficult to secure additional funding for more investments.

Rates

Some people have taken advantage of benefits such as mortgage interest tax relief by establishing a company structure. However, this may not always be appropriate due to the fact that the interest rates for a company structured deal may be higher.

As with any type of mortgage or loan deal, it is important to weigh up the initial upfront cost alongside what you will be regularly paying over the course of the month.

Another consideration are the affordability tests that come with applying for these kinds of deals- these tests have become stricter as the market for BTL properties has become larger.

For first time buyers this can be harder as the range of deals is smaller compared to people who have already owned BTL properties. There is also the scenario where somebody becomes an “accidental landlord” such as when someone inherits a property. In this instance it may be possible to get a “consent to let” on a current deal or you may need to renegotiate.

We can help

At Hove Mortgage Services, we want to take the hassle out of securing a mortgage and make sure you get the best deal that is available to you from the best available lenders. To find out more about how we can help secure the ideal BTL mortgage to suit your current circumstances please contact us today.