Buy To Let Mortgages UK
Buy to let is one of the biggest markets in the UK; it is also one of the fastest growing areas of investment...
Funding a Buy to Let Investment: Mortgage Types
Having decided to get involved in the buy to let market, the first thing that needs to be considered is how this project is likely to be financed. Fortunately, there are a wide number of options available which allow potential investors a wealth of opportunities when it comes to financing the project.
Buy to Let Mortgages
Beyond a shadow of a doubt, the vast majority of buy to let investors will use a specialist form of buy to let mortgage in order to purchase their property. A buy to let mortgage has different requirements and restrictions compared with a standard residential mortgage. In addition, the rates offered are sometimes not as competitive as those mortgages that are used specifically for residential mortgages. Do not be tempted to use a residential mortgage, as if you then let the property you are, in effect, breaking the terms of the mortgage and the lender may withdraw their financing.
Buy to Let Mortgage Restrictions
A larger deposit is usually required, especially if it is your first buy to let property, as you are a "first time landlord." A deposit of around 15 to 25 percent is usually required and it will be necessary to prove to the mortgage lender that the rent will cover in the region of 125 percent of the mortgage repayments. Some companies will offer mortgages with a lesser deposit or with lesser coverage but in order to give yourself the widest range of choices when it comes to mortgage providers, it pays to be able to meet the basic crieria.
Some mortgage providers will offer services especially tailored for investors who have growing portfolios. Some providers will only finance lending for up to 5 properties, whereas others will allow any number of properties but may place a maximum total value on the portfolio. When you are starting out as a property investor, it can be difficult to consider your future needs. Nevertheless, paying attention to your requirements at this early stage can mean that you have a flexible financing structure in place from the very start.
As well as a buy to let mortgage, many investors will consider joining a property syndicate, whereby they are only required to invest a small amount of cash. By joining forces with other investors it may not be necessary to borrow any cash at all. Other alternatives include re-mortgaging the family home, which is a popular choice for investors who do not have a mortgage on their home. For those who do have a mortgage on their home, they may wish to remortgage a small amount to raise deposit funds. Short-term financing with loans and credit cards is also an option but can be costly, although it does allow for a quick release of cash.
Buy to let mortgages are the most popular of choices for buy to let investors;
a range of mortgages is available on the market, each offering a slightly different service and restrictions; and
alternative financing options exist, although these are not without their risks and should be considered carefully.