Commercial letting has always been a reliable source of income for UK landlords. Despite the fall of the entire housing sector back in 2008, the property letting’s marketing has continued to grow. This is mainly because of the fact that many potential homebuyers find it so difficult to qualify for mortgages and save up a sufficient deposit. In addition, the recent increase in mortgage interest rates makes it even tougher for borrowers to keep up with the repayments. In such cases, renting a flat or a house becomes the most affordable and reasonable option. Moreover, many investors do not agree with the returns on their investments that savings accounts, volatile stock shares or pension funds give. Thus, investing in a property to generate a steady but safe stream of rental income becomes a good option. The first step towards investing your time and money into being a landlord invariably requires you to look for an affordable buy to let mortgage.
• Single let properties.
• Multi-let properties and HMOs.
• Commercial let properties.
• Refinancing of existing buy to let mortgage.
• Buy-to-let mortgages customized for your project.
• Over 10 years of experience in broking flexible buy to let mortgages.
• Affordable interest rates.
• Relatively lower deposits.
• Fixed rate BTL mortgages as well as tracker BTL mortgages available.
• High LTV ratios (up to 85%).
• Buy to let mortgages available for single lets, multi-lets, HMOs and business lets.
• Offers from responsible, experienced lenders.
• Easy application, fast decisions (within 24 hours).
• Easy application, fast decisions (within 24 hours).
• Free quotes available.
Buying-to-let is still a comparatively safe way of generating regular income. However, would-be landlords must always keep in mind the risks that come with such investments. Let’s try to weigh these risks with corresponding rewards.
Most landlords don’t want to forever ‘hold’ the property they are letting. So, at some point, they look to sell the property, chiefly to settle the BTL mortgage. If the housing market is in good health, such investments usually return sizeable returns after the mortgage and taxes are paid for. In fact, a large share of the overall profits from buy to let ventures comes after selling the property. On the other hand, if the price of the property goes down for some reason, you will be left to make up for the difference while repaying your BTL mortgage. As a rule of thumb, landlords should make sure that they are able to bear a loss of up to 30% of the property value, if, unfortunately, the property prices slump at the time of resale.
Few investments can yield a reliable stream of monthly income. Buying to let is definitely one of them. So, it’s safe to say that the rewards that come with such ventures in this regard are attractive. However, it is vital to know that finding suitable tenants for your property isn’t always easy. In fact, you will invariably have to deal with ‘cold’ (void) months during which your property isn’t let to its maximum capacity.
From stamp duties to local council taxes, a number of components need to be accounted for while you draw up your buy to let numbers. In addition, regular refurbishments, compliance with codes, and disputes are just a few of many factors that can skew your buy to let balance sheet adversely.
The eligibility criteria for BTL mortgages, although quite similar to other mortgages, are in the league of their own. Lenders foresee a significant level of risk while agreeing to lend money for such projects. Hence, you need to qualify on numerous eligibility criteria to be eligible for a buy-to-let mortgage. This shouldn’t, however, discourage potential landlords from applying, as many lenders tend to relax these criteria if they are satisfied with your repayment potential.
Most landlords require the borrower to be at least 25 years of age. This is in stark contrast with most other mortgages where the age bar sits at 18 years. Lenders also prefer making sure that you are no older than 70 by the time the mortgage tenure concludes. For example, if you are presently 50, you are most likely to get BTL mortgage offers with a term of 15-20 years. Lenders are more likely to accept BTL mortgage applications from landlords who already own a property. You will find it much easier to secure a buy to let mortgage if your credit score is healthy and your history of repayments is spotless. Having no outstanding loans or credit card bills in your name is another advantage to have. If you are applying for a buy-to-let loan, you need to have a reliable, consistent stream of income. Applicants who earn in excess of £25,000 per year have a very good chance of getting a buy to let mortgage. Another important eligibility criterion is the deposit. While it is indeed possible to get an LTV of up to 85% if you have a clean credit record, landlords should look to invest at least 25% of the property value as a deposit. This brings the LTV down to 75%, attracting more offers, and better BTL mortgage deals. Buy to let mortgages are interest heavy. So, lenders like to ensure that the borrower can settle the interest payments every month from the rental income. The present norm for the rent to interest ratio stands at 125 to 130%. So, if the monthly interest on your buy to let mortgage comes at £1,000, your property needs to generate a monthly rental income of £1,250 or more.
If you are planning on buying a property to let, it’s important that you know and understand the risks very clearly. What’s also important is ensuring that you don’t get into a BTL mortgage that isn’t the best for you. This is where a leading whole of market broker like Cognis Capital Partners can be a great asset to have on your side. Our extensive experience of broking and negotiating hundreds of buy to let mortgage deals puts us in a position from where we can judge the potential of your project better, thus allowing us to match your application with suitable lenders.
“You will be keeping your Buy to Let mortgage for many years – if not decades. So, it’s very important to know that you’re getting a fair deal. Cognis Capital Partners holds a peerless track record of broking fair, affordable, and tailored BTL mortgages for new as well as experienced landlords across the UK.”
Here are the prime factors that make our BTL mortgage services a go-to name for UK landlords:
o Being truly independent, we have access to the entire range of Buy to Let Lenders, allowing us to find just the right lender for your buy to let mortgage application.
o Our BTL loan offers are fully customized to match your exact requirements.
o From single lets to HMOs, we cater to all of the particular mortgage requirements.
o Working closely with lenders allows us to expedite the release of funds to your account. Your buy to let venture is just as important to us as it is to you.
o We can offer some of the most competitive buy to let mortgage interest rates.
o Our unique customer service portal is available 24×7, giving you real time status updates on your BTL mortgage application.
Traditionally, most aspects of BTL loans have remained out of the purview of the Financial Conduct Authority (FCA), barring crass dereliction, irresponsible behaviour or gross misconduct by any of the parties involved. This, however, has changed with the enforcement of the Mortgage Credit Directive. As per the directive, the FCA will regulate any BTL mortgage that comes under the ‘consumer loans’ category. To put it simply, first-time landlords have the luxury of declaring their buy to let venture as a consumer venture, and not a business venture.
When it comes to buy to let mortgages, landlords need to choose from the two broad categories. These categories are based on the interest rate that will be applicable for the lifetime of the loan.
As the name suggests, fixed rate BTL mortgages feature a uniform value of interest rate over the entire term of the loan. This is perhaps the most common buy to let mortgage type used in the UK. Fixed rate BTL mortgages allow both the lender and the borrower to keep a tight control over the numbers, regardless of the prevalent market situation.
Tracker loans feature variable interest rates. These rates are typically a function of the Bank of England Base Rate. Tracker mortgages, for the initial months of repayment, allow for lower interest rates than fixed rate mortgages. However, in volatile market conditions, it’s advisable to go with a fixed rate in order to plan the repayment with more certainty.
Most landlords who choose to take a buy to let loan do not intend to own the property beyond the tenure of the mortgage. Therefore, ‘interest only’ buy to let mortgages are more common in the UK. An interest only buys to let loan requires the borrower to only pay the monthly interest over the tenure of the loan. The principal loan amount is repaid at the end of the loan term by selling the property. On the other hand, a repayment buys to let loan requires the borrower to repay the principal as well as the interest monthly. This results into much higher monthly repayments. The borrower outright owns the property upon successful repayment.
Having closely watched the letting industry for years, we can’t stress enough how important it is for landlords to choose nothing but the best buy to let mortgage offer. An unfair BTL mortgage deal can see you paying hundreds, if not thousands, of pounds that you didn’t have to. Cognis Capital Partners, being one of the most experienced whole of market brokers in the UK, has all the expertise and the resources it takes to help you avoid this fate and maximize your rental income.