Home
Best Buys
Mortgages
Specialist Lending
Related Costs
HIP Reports
Protection
Equity Release
Commercial Lending
Legal Quote
Recommended Links
Contact Us
 
 

 
This type of investment, for many years seen as the exclusive domain of the ‘professional’ landlord, has in recent times become popular with many others who see residential property as an alternative method of saving for their long term future. Whilst care should be taken in looking at any particular area alone, property can certainly be seen as a complimentary part of any portfolio which may also include other tax efficient investments such as pensions and ISA’s.

As with self certification mortgages the lending criteria is again more stringent with most lenders applying a maximum loan to value of 85%. However, it is currently possible to borrow up to 89% of the property value. The other factor which will determine the actual amount available is the anticipated rental income. This will be assessed by the lender appointed surveyor at valuation stage and is expected to be more than sufficient to cover the interest only element of the loan as this type of mortgage is usually deemed to be self funding. A factoring equation will be built in to this to cover other anticipated expenses and periods when the property may not be let. A typical example is as follows;

Purchase price:  £100,000
Loan:  £  85,000

Rental assessment calculated at 125% and based on a notional interest rate of 5.5% =

£85,000 x 5.5% = £4,675 x 125% = £5844 per annum = £487 per month anticipated rent.

Although a few lenders will allow for a combination of rental and earned income, all commitments, including any residential mortgage, personal loans and other credit commitments will have to be covered.

Many of these mortgages are set up on an interest only basis with the loan being cleared with the eventual sale of the property. The investment is therefore seen as the rental income achieved over and above the mortgage payment and any increase in value of the property over the years ahead. If circumstances allow, the mortgage can be set up on a repayment basis, or even a combination of the two, to allow for an increasing or even wholly owned asset at some point in the future.

A Buy to Let Mortgage is not regulated by the Financial Services Authority unless the tenant is a member of the borrowers’ immediate family, or the borrower intends to occupy the property at some state.
 
Broker fees may be payable for mortgage advice. These would typically be 0.5% of the loan we arrange for you. However, we will discuss your payment options with you and confirm the actual amount payable before we begin to provide our services.