Best buy to let mortgages from Quiddi Compare
At Quiddi Compare, we work with some of the best buy to let mortgage providers in the UK. If you are looking for to buy a property and rent it out, we can put you in touch with the best company based on your circumstances. By filling in our form above, someone from our dedicated team will get in touch and give you different quotes for a buy to let mortgage. We aim to provide the best interest rates and loan-to-value we can from the top buy to let mortgage providers. We are always looking for new partners and products to ensure our customers get the best deal. Our personalized service is completely free of charge for the customer and we take a small commission from the lender to ensure that our service is always free.
What is a buy to let mortgage and how does it work?
A buy to let mortgage is for people to looking to buy a property and rent it out to the public for a profit. Typical for landlords and property investors, the idea of building a house or flat and fixing it up and renting it out poses a good investment opportunity where the demand for rented accommodation is the UK is growing rapidly. There is a lot of interest from young professionals for rented accommodation as the cost for first time buyers has increased over time. With this in mind, several opportunists all over the country have opted in to buying properties through buy to let mortgage schemes.
How is a buy to let mortgage different from a regular mortgage?
Buy to let mortgages are all about buying the property and renting it out to tenants. The mortgage rates therefore are assessed largely on the rental income you will receive. The idea is that landlords will charge around 125% of their mortgage fees in rent to the tenant – meaning that the landlord should make a profit of around 25%. When it comes to deposits, a buy to let mortgage requires at least 25% of the property value up front to proceed. Naturally, the more you deposit, the better interest rate you will receive but overall the interest rates for buy to let mortgages are higher than you typical mortgage.
The payment structure of a buy to let mortgage is similar to a regular repayment mortgage. Borrowers are expected to make monthly repayments of capital and interest and the mortgages are available in interest only, tracker and fixed rate as discussed below:
Types of buy to let mortgages
Interest only – most buy to let mortgages are interest only although they also come in the form of fixed and tracker. The reason that they are mostly interest only is because this is the most affordable way to pay for a mortgage in the short term since you are paying just the interest and no capital initially. It gives the landlord the option to pay the full capital at the end of the mortgage term or change to a different mortgage repayment plan later on. There is the added bonus of being able to offset the mortgage repayment against your tax bill.
Fixed – This is less common for buy to let mortgages but is still available and this involves having the same fixed interest rate throughout the entire mortgage period. The rate will not change unless the type of mortgage is changed.
Tracker – This is also less common for buy to let mortgages and involves putting the interest rate on a tracker with the Bank of England base rate. The interest rate will therefore fluctuate regularly and landlords may have to pay higher or lower interest rates as a result.
Am I eligible for a buy to let mortgage?
The criteria for a buy to let mortgage requires the landlord to be over 25 years of age and the mortgage period must end when that individual reaches the age of 75. Borrowers are limited to 3 buy to let mortgages at any given point and the maximum they are allowed to borrow in total is £2 million. The landlord must also have a minimum income of £25,000 per year. If you are wondering if I can get a buy to let mortgage based on my credit score, lenders tend to favour those with good credit ratings. Underwriters will look at how well you have paid other mortgage repayments in the past and if you have any outstanding debt from credit cards and loans. Those borrowers with bad credit may still be eligible for a buy to let mortgage but this will be reflected with a higher monthly interest rate.
Things to consider when applying for a buy to let mortgage
The arrangement fees are higher for buy to let mortgages and range from £1,000 to £3,500. This is an extra cost to take into consideration before proceeding. It is worth shopping around for the best providers in order to save on the arrangement cost.
It is also important to think about the return of investment if you have to pay monthly mortgage repayments and to fix up the property. A good way to ensure a return on investment is to carefully select the area that you are buying the property to see if there is a demand for rented accommodation and if the estate will maintain its value. It can be useful to look at previous price values of that area and forecasts for the next few years. Ideally, you want to invest in a property in an area that is thriving and will see a growth in value.
Doing your maths is important to assess whether or not you will make a return on a buy to let mortgage. One must consider alternatives such as savings accounts and peer to peer lending which may offer better rates of return and much less stress.
Finally, if you plan to sell your property as an exit strategy, is it important to factor in the cost of capital gains tax, which will apply if you sell the property for a profit. As a business opportunity, it is important to do all the calculations before committing to a buy to let mortgage. For more information, you can use the mortgage calculator provided by the Money Advice Service.
Risks of buy to let mortgages
There are risks associated with a buy to let mortgage which borrowers must be aware of before applying. For instance, landlords will be responsible to collecting rent from their tenants in order to fund their mortgage. If tenants do not pay their rent, the landlord will be expected to cover the cost of the mortgage and his may lead to financial difficulty. With this mind, it is essential for landlords to carefully select their tenants and monitor the repayments carefully.
In addition, landlords must consider the possibility of their property’s value depreciating. If the value of the estate goes down over time, landlords may have to charge less rent or they won’t be able to sell the property for as much as they like and this will lead to lower return on investment.
Finally, the most important thing to remember before committing to a long-term mortgage is that if a borrower fails to meet repayment, it could lead to a repossession of the property. Furthermore, the individual may incur further charges and have a negative impact on their credit rating and this will make it harder and more expensive to access credit and finance in the future.
The advertised rate is 1.95%. However this rate will not be available to everyone and will depend on your individual circumstances and the loan to value ratio of your mortgage.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Some partners may charge you a fee for helping you find a Mortgage or Secured Loan or other services they provide. MAKE SURE you check with the company before agreeing to any service if they charge you a fee and what the terms are.
Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk QuiddiCompare does not charge a fee and does not provide any financial advice relating to mortgages. However we may on occasion receive commissions from IFA’s and mortgage providers, brokers and intermediaries for introducing you to them.
The content of this site is meant to be informational, and it should not be considered financial advice. – See more at: quiddicompare.co.uk/mortgages