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Getting the right buy-to-let mortgage

Investing in a buy-to-let property can be a lucrative venture, but it’s important to make sure you have the right mortgage in place. With the rise of the “buy-to-let” market, there are now more options available for landlords looking to finance their properties. In this article, Credicus explores the key factors to consider when choosing a buy-to-let mortgage.

Understanding buy-to-let mortgages

Before diving into the specifics, it’s important to understand what a buy-to-let mortgage is. Simply put, it is a mortgage specifically designed for landlords who are looking to purchase a property to rent out. These mortgages typically have different criteria and interest rates compared to traditional residential mortgages.

Deposit requirements

One of the key differences between a buy-to-let mortgage and a residential mortgage is the deposit requirement. While first-time buyers may be able to secure a mortgage with a 5-10% deposit, buy-to-let mortgages typically require a larger deposit, usually around 25% of the property’s value.

This is because lenders see buy-to-let properties as a riskier investment and want to ensure that the landlord has a significant stake in the property.

Interest rates

Interest rates for buy-to-let mortgages are typically higher than those for residential mortgages. This is because lenders see buy-to-let properties as a riskier investment, and therefore, they want to mitigate that risk by charging higher interest rates. It’s important to shop around and compare interest rates from different lenders to ensure you are getting the best deal.

Rental income

When applying for a buy-to-let mortgage, lenders will also consider the potential rental income of the property. They will typically require the rental income to cover at least 125% of the mortgage payments. This means that if your mortgage payments are £1,000 per month, the rental income should be at least £1,250 per month. Lenders may also ask for proof of potential rental income, such as a rental valuation from a letting agent.

Using a buy-to-let mortgage calculator

A BTL (Buy-to-Let) mortgage calculator is a tool that helps you estimate your monthly mortgage payments based on the property price, deposit amount, and interest rate. It takes into account the type of mortgage, the length of the mortgage term, and any additional fees or charges. This calculator is specifically designed for property investors who are looking to purchase a property to rent out.

With a BTL mortgage calculator, you can easily compare different mortgage options. By adjusting the interest rate, mortgage term, and deposit amount, you can see how each option affects your monthly payments. This allows you to make an informed decision and choose the best mortgage option for your financial situation.

Get professional advice

Navigating the world of buy-to-let mortgages can be overwhelming, especially for first-time buyers. It’s important to seek professional advice from a mortgage broker who specialises in buy-to-let mortgages. By considering these key factors and seeking professional advice, you can ensure that you are getting the right buy-to-let mortgage for your investment property. 

Here at Credicus, we can help you understand the different options available and guide you towards the best mortgage for your specific needs.Contact us today to book an appointment with one of our advisors, who would be happy to assist you further.

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