With property prices still low, First Time Buyers struggling to get on the property ladder and returns on savings still relatively unattractive, many are investing in property as a long term investment. Remember that lender terms and conditions will always apply and you should always seek professional advice!
The Buy to Let market is buoyant as First Time Buyers continue to find it hard to obtain mortgage finance and turn to renting. More lenders have entered the sector and many are seeking criteria niches in addition to competitive pricing, to attract new customers.
Buy to Let mortgages are now available with as little as a 15% deposit and are available to First Time Landlords, as well as experienced property professionals.
In addition, some lenders no longer require a minimum income. Historically, this would have needed to be between £20-30k per annum in order to meet the lenders requirements. However, there are now instances when this stipulation has been removed and as long as the customer has an income (mainly to cover the lenders affordability should their be a rental void period), lenders will assist.
Another recent development is the way a lender calculates the loan available. With all properties a surveyor will visit the subject property and value it’s worth. With Buy to Lets, the valuer will also include a rental estimate. It is this estimate that will be the key factor in lending any amount to a prospective borrower. A normal calculation suggests that the rental must be 125% of the mortgage payment. Any less and the lender will reduce the mortgage loan according to the reduced rental income. For example, if you wanted to borrow £100k, a reasonable test would be to multiply this by 5% (a fairly average calculation) and divide by 12 to get the monthly cost. This would then be multiplied by 125% to determine the required monthly rental! Therefore, in this example, the rental would need to be £521pm to achieve the £100k loan. We are seeing competition increasing in this sector and as such some lenders have reduced this calculation to 110% of the mortgage. Please note that varying lenders will have alternative calculations and, in most cases, the actual rate paid to the lender will be less than the rental stress test calculation mentioned above.