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Buy to Let mortgages are designed for landlords who invest in property with the intention to rent the property out.
The landlord would typically need a minimum deposit of 25% and the mortgage is often interest only which allows for a greater yield.
The mortgage value is determined by the rental income that the property generates.
Please contact the Covertree team to discuss your options if you looking for a Buy to Let mortgage.
Typically, mortgages last around 20-30 years, but this can change according to a whole variety of factors. When you set up your mortgage you will decide the term (i.e. the length of the mortgage) according to your repayment plan.
The value of what you can borrow will depend on various factors to do with your current financial situation as well as the value of the property that is being purchased/remortgaged.
Traditionally mortgage lenders used to use a simple basic multiple of your base income in order to calculate how much they are willing to lend you. Nowadays lenders will conduct a more thorough financial evaluation, taking into account your net income, with your regular monthly outgoings and expenses considered, in order to calculate how much you can borrow. Lenders will also look at your credit score and any loans or credit cards you currently have.
When purchasing a property you will need to calculate the value of the deposit you can pay or are required to pay up front before a mortgage lender will lend you the rest. The value of the deposit that you are required to pay will depend on your financial situation and credit history.
The difference between the amount borrowed and the actual value of the property is known as the loan-to-value ratio, or LTV.
For example – if you are looking to purchase a property worth £500,000 and you are required to pay a deposit of 10% (£50,000). The lender lends you £450,000 as the mortgage amount, this will give you an LTV or 90%.
A lower LTV is often the better option, this will usually mean you will need to pay a bigger deposit. However this will often allow you to get better deals all around and as you’re borrowing less in the first place, your monthly repayments will be smaller.
If you are looking to move, most lenders will allow you to port your existing mortgage to your new property and continue paying as usual.
You may be required to have a new affordability and credit check carried out if your new property’s value is significantly different from your old property. If you do want to move house, you will need to contact your existing mortgage lender first and they’ll advise you on what your options are.
If you find yourself unable to keep up with the monthly repayments, then you need to contact your lender as soon as you are unable to make a payment. The lender may be able to offer you options to help you, some of the options that are available can be – taking a repayment holiday which is where you can stop payments for a short time, starting a new mortgage or adjustments to the existing repayment plan.
You should contact you lender as soon as possible, as multiple missed payments could result in your home being repossessed.
You can, this is referred to as releasing equity, which is subject to affordability checks by your lender.
For example – If have a mortgage worth £500,000 on a property that is worth £550,000. The £50,000 difference between what you’ve borrowed and the value is the equity. If over the course of a few years, your property goes up in value, by another £50,000, then the equity in your property has increased. You could then choose to remortgage and release some of the equity as cash, while maintaining the same LTV on your mortgage.
If you do remortgage, there may be early repayment charges that your current lender might charge.
There are many mortgage products available to suit a whole range of financial situations and if your credit score is less than perfect, don’t worry, there is likely to be a mortgage that is available to you.
If you do have a poor credit score, you should be able to to get a mortgage product, however you may not be able to benefit from the best deals. The risk to lenders is increased if you have a poor record of repaying in the past, therefore you may be offered a slightly higher than normal interest rate, or maybe a lower LTV ratio.