With the rental market continuing to be buoyant, and with no signs of declining, the mortgage market is active as lenders recognise the huge demand for Buy to Let (investment property) mortgages. These can be from a first time landlord, right through to the experienced House of Multiple Occupation (HMO) / Student Let portfolio investor. Whatever the scenario, there will probably be a lender who will look to assist.
This sector has also recently been through a price war, rates are competitive and may also come with package deals, such as free valuation and free legals.
But with so many lenders now in this sector, rates may not be the main area of competition any longer. Some lenders are also reviewing criteria in order to attract new business. Many lenders historically would not allow first time landlords, anyone earning an income less than £25k, or those who have more than ten properties, to give you a few examples.
However, we have seen recently that criteria is being relaxed and lenders are competing to attract more business. As such, one of the main Buy To Let lenders, BM Solutions, has recently removed their minimum income requirements. This now means there are three or four lenders in the market who no longer require a minimum income. They will still require proof of income to ensure affordability, should a tenant void be incurred.
Buy to Let properties will often provide a modest monthly return over and above the mortgage payment. The additional amount can be used to supplement income, or, with flexible mortgages, can be used to “overpay” the mortgage and reduce the term.
Most lenders in this sector will require the rental income to exceed the mortgage payment by up to 125% and, after costs such as managing agents this should leave some spare cash to cover repairs, maintenance and landlords insurance. It should also enable a fund to be established to cover the mortgage payment in the event that there is no tenant in situ for a while. Remember that, whatever the deal, lender terms and conditions will always apply.