With a high demand for rental property, especially student accommodation, it is understandable that investors are looking to obtain a buy-to-let mortgage. At Student Circle, we have helped many investors meet the needs of Coventry students, and if you would like to join the market, we are here to show you how to improve your chances of obtaining a buy-to-let mortgage.
Some of the important things to remember about a buy-to-let mortgage include:
· The fees associated with a buy-to-let mortgage are higher than standard mortgages
· The interest rates associated with a buy-to-let mortgage are higher than standard mortgages
· Buy-to-let mortgages usually require a greater deposit than standard mortgages, ranging between 20% and 40%
You will also find that most buy-to-let mortgages are interest-only mortgages. Therefore, landlords will normally only pay the interest amount each month, leaving the capital amount to be repaid at the end of the term.
Consider the costs of a buy-to-let mortgage
There are fees associated with buy-to-let mortgages, including:
· Arrangement fee, which is the fee charged by the lender for setting the mortgage up, and this amount may vary depending on the size of the loan, the style of property and the lender
· Insurance, landlords must consider buildings insurance, which is different from standard house insurance, and it may be wise to invest in content insurance if you offer furnished property
· Valuation fee, which is the charge imposed by the lender for carrying out a valuation of the property, which is an essential component of them lending you the mortgage. The cost of the valuation fee is dependent on the size of the property and the lender’s own charges
· Legal fees, cover the costs of work carried out by solicitors and conveyancers, and all legal work associated with the property transaction
Things to consider in applying for a buy-to-let mortgage
Most lenders require buy to let investors to already own property, either owning it outright or through an existing mortgage before they provide them with a buy-to-let mortgage. Although each lender has their own criteria, it is unlikely that a buy-to-let application will be accepted if the investor doesn’t earn at least £25,000 each year.
You should also have a good credit rating and if you have existing borrowings, you shouldn’t be too stretched with these borrowings. In recent times, lenders have tightened the criteria that they apply to buy-to-let mortgages. This has made it harder for investors to obtain a buy-to-let mortgage, so it is important that investors arrange their finances as strongly as possible before making an application.
Another issue for lenders to consider is that many lenders have age limits when offering buy-to-let mortgages. The upper age limit is usually between 70 and 75, and this is the oldest agent you can be when your mortgage comes to an end, not when it starts.
As an example, if you apply for a mortgage with a lender who has an age limit of 70, and you are looking to obtain a 25-year mortgage, the upper age limit to obtain this mortgage is 45 years year old. With respect to a lower age limit, most lenders will only offer a buy-to-let mortgage for people aged 21 years old or older.
At Student Circle, we know the impact that good landlords have on a local community and on tenants. We are delighted to say we have helped many landlords in and around Coventry, and if you are looking for guidance when it comes to obtaining a buy-to-let mortgage, get in touch and we will be happy to help.