Buy To Let Mortgages..
Factors to consider when purchasing a BTL [Buy To Let] property:
The buy to let mortgage market has changed significantly over the past 18 months. If you are thinking about purchasing a buy to let property then we suggest you going through this simple guide to help you make sense and make the right decision.
The buy to let mortgage market and regulations:
In order to be a profitable landlord, having the right advice from an experienced mortgage advisor is vital. You could be purchasing a property for a long-term investment such as retirement income or to increase your current income. Our advisors are up to date on the UK legislation and lender criteria and can advise you on the right type of product that suits your particular requirements and can also put you in touch with tax specialists [if needed] who can help with structuring and advising on the most efficient way to purchase a buy to let property.
Affordability calculations for buy to let mortgages:
Due to recent tax regulations, buy to let mortgage lending has become a lot more focused on affordability during the term of your mortgage. Calculating how much you can borrow is not a simple as putting down a 25% deposit based on the purchase price. Now lenders use different calculations and apply a stress test. They factor in buffers to cover things like void periods, estate agency fees, ground rents and service charges. Lenders now use an Interest Coverage Ratio [ICR]. This will determine the amount they will lend based on the rental income and depending on the lender your personal income to cover the mortgage and associated costs.
The amount you can borrow is now also determined by if you are basic or higher rate tax payer and if you are looking for a 2 years fixed rate or a longer-term fixed rate such as 5 years.
If the lender is taking your personal income into account – ideal if the rental is not giving you the borrowing you need – this is called “top-slicing”. This is where the lender looks at how much you earn, deduct your current expenditure and see if there is any surplus income that can be used to make the new borrowing more affordable.
If you are looking for a buy to let mortgage or re-mortgage then please get in touch and one our specialist advisors can walk you through your options in more detail.
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