Buy To Let
If you are intending to buy or remortgage a property to let out, then you will need a Buy to Let Mortgage. The amount you will be expected to put down as a deposit vary, however, it is fair to assume that you will need to put down between 10% and 25% as a deposit.
Given the enormous growth within the buy to let market, there has been significant movement within the financial lending market to accommodate this move.
Today, buying to let a property is no longer the preserve of the business entrepreneur, and many families opt to buy a second home to let out as a second income, leading to an increase in choice for consumers.
Many lenders now offer the opportunity to take out multiple mortgages for buy to let properties, giving people the opportunity to build a portfolio of properties.
Given the higher risks involved with choosing to buy a property to let out, buy to let mortgages often work out slightly more expensive than a residential mortgage.
The amount you can lend may be based upon:
- Your current income although many lenders are happy even if you have a very limited income.
- The rental income from the property only.
Due to the nature of the buy to let mortgage market the cost of mortgages vary enormously. At TMC, we will help you through the many options to ensure the mortgage you take is the right one for you.
It is also very important to consider any relevant tax implications, as any interest you pay on your mortgage may be able to be offset against tax, though capital payment cannot. Consequently, it may be to your advantage to apply for an interest only mortgage. Of course, if you are eager to pay off the outstanding mortgage, then you should always opt for a repayment mortgage. There may also be a liability for capital gains tax if you sell your property. !!!!!!!!!! Buy to Let mortgages may not be regulated by the FSA !!!!!!!!!!!!!!!!!!
We strongly recommend that you speak to a specialist tax adviser or accountant to discuss any tax liability before you invest in a buy to let property.
Mortgage Options
Repayment Mortgage
Monthly payments will gradually pay off the amount you owe (the capital) as well as paying the interest charged to you for the loan. Provided you make all these agreed payments, your loan will be paid fully by the end of the mortgage term.
Interest-Only Mortgage
Monthly payments cover the interest on the loan only, but do not pay off any of the capital. Separate arrangements need to be made to pay into a savings or investment scheme. This needs to build up a lump sum to pay off the mortgage at the end of the term. You have to make sure you have enough money to repay the mortgage at the end of the term, otherwise you could lose your home.
Interest Rate Arrangement
Whether you choose a repayment or an interest-only mortgage, you need to consider the different types of interest rate options available to you.
Remember, what looks like a cheaper mortgage today may not prove to be so in the longer term. Ask what happens after any special deal ends.
Standard Variable Rate Mortgage
Monthly payments go up or down when the lender's mortgage rate changes.
Tracker Mortgage (variable interest rate mortgage)
A tracker mortgage interest rate is a set amount above or below the Bank of England or some other base rate. It 'tracks' changes in that particular rate.
Discounted Interest Rate Mortgage (variable interest rate mortgage)
With a discounted interest rate mortgage your payments are variable, but are fixed at less than the lender's standard variable rate for a set time. At the end of this period, you are usually charged the lender's standard variable rate.
A Mortgage with Cashback
A cashback mortgage is where you receive a sum (usually between 3 and 5 percent of the amount borrowed, but sometimes a flat figure) shortly after you take up the loan. Normally some or all of the cashback is repayable to the lender if you repay the mortgage in the early years.
Variable Rate Mortgage - Good or Bad
Good: You could benefit from any reduction in the current interest rates. This may mean your monthly payments go down. You usually have flexibility to overpay without any penalty. This assumes that there are no restrictions on making overpayments and early repayment charges do not apply.
Bad: When interest rates rise, your monthly payments could go up. With discounted mortgages, you need to think about what your monthly payments will be at the end of the discounted period, including any potential increase in interest rates.
What does loan-to-value (LTV) mean?
Loan to Value refers to the loan as against the value of a property expressed as a percentage. For example, a mortgage amount of £90,000 against a property value of £120,000, the LTV would be 75%.
Broker Fee Agreement
There may be a fee for Mortgage Advice; the amount will depend upon your circumstances but we estimate it to be 0.5% of the mortgage sum.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
