Buy to Let mortgages seem to be the flavour of the month again. With the rental market remaining buoyant and showing no signs of declining, lenders are reacting to the huge demand for investment / buy to let properties. This sector has also experienced a recent mortgage price war and some major criteria changes as lenders seek to attract more of this business type. Mortgages can be achieved up to 85% of the property value. But, as with all mortgages, the smaller the deposit, the higher the ‘risk’ and therefore the higher the rate.
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 may use a higher stress test rate to calculate this. Remember that, whatever the deal, lender terms and conditions will always apply and there are no guarantees of continued rental or capital growth.
More generically, many of us will review car insurance, home insurance, gas and electricity suppliers to find the best rate on the market and tell everyone when they have made even a small saving. Given this, it is astounding just how many people leave their mortgage with their existing supplier and some don’t know what rate they are paying! Most lenders look to attract new customers, but are less likely to offer attractive options to retain them. This, in the main, is due to the different fees and charges that can be added to the new mortgage at the outset. In the current climate, the lenders bottom line tends to be more profitable with new clients, rather than old. There are many good rate options available currently and most with minimal costs to move. So don’t feel loyal, if a better option is with another lender – think of number one!