A Guide to Buy to Let Mortgages – made even simpler!
Ok let’s get straight into it
Who would want to get a BTL – Buy to Let mortgage
Typically, those who are interested in becoming a landlord and investing in property and, either have a property unencumbered, have a sizeable amount of equity available or are looking to purchase a property that has caught their eye.
Helpful to have a good credit score, at least 25k a year of income (having less is OK, just fewer lender options on the market) experience of already being a homeowner and of age are all factors that will play a part in helping those who are interested, making the first move.
Buy to Let mortgage deposit
The typical deposit for a BTL is around 25% of the property’s value so if you have a 100k property be prepared to have 25k ready as your deposit.
The rent of the property should support the mortgage being taken as the lenders will want to ensure the rental income covers the cost of the mortgage. The rent you receive needs to be above that of the payment which different lenders have different methods of calculation when it comes to the scale of lending power!
Luckily, for those who are already part of the Lofti community as users will be able to enjoy expert advice from the specialist mortgage team who are on hand to help with advising on the most suitable lenders, ensuring a tailored approach to advise. This means you get to manage all of your portfolios on one system and get integrated connected and bespoke advice.
Buy to Let as property investment
However, like most investments, there will always be a degree of risk involved. With investing in rental properties, you may experience a period of vacancy on your property, you will still need to make sure the mortgage payment is met. This is why having a solid business plan will always be a key factor in running a successful buy-to-let property and having a long-term income from the asset.
It is very common to see buy-to-let mortgages being on interest only which means the monthly repayment ends up being only the interest on the mortgage loan, the capital, in this case, will stay the same throughout the term of the mortgage unless you decide to look at options of paying down the capital.
This will mean you will need a repayment strategy, as the mortgage lender will want all of the mortgage repaid at the end of the term. A common repayment strategy is selling the investment property at the end of the term in order to repay the mortgage.
This is why it is key to track your property investment in both its value on the market and the rental income you receive as these will be two important factors in your overall buy-to-let business plan.
With Lofti you can track your tenancies and keep an eye on how much rent you have received from your buy-to-let. Having this data over time will give you a great insight into the Return on Investment of your buy-to-let and give you the bigger picture.
Oh and don’t forget, renting out your property: Paying tax and National Insurance – GOV.UK tax is really important and landlords will have to make sure they are paying the correct amount – make sure you check in with a qualified accountant to get yourself set up from the get-go!
Hopefully, this has given you an insight into the world of buy-to-let mortgages and some helpful tips to get you off to a great start!