Given the high demand for rental property, it is easy to see why many people consider becoming a landlord and letting property. Of course, being a landlord is far from straightforward, and there is a considerable range of factors to consider when letting property. However, if you familiarise yourself with the sector, you can make an informed decision as to whether buy to let is a sector which is right for you.
Is a buy to let mortgage the same as an ordinary mortgage?
No. While there are many similarities between buy to let mortgages and ordinary mortgages, there are differences, and you should consider these aspects.
The fees are higher with buy to let mortgages
When it comes to the fees associated with mortgages, you will pay a lot more for a buy to let mortgage than a standard mortgage. Given the sums of money involved, in a limited time-frame, it is vital you are aware of the costs associated with arranging a mortgage.
Anyone who expects to pay a similar amount of money for their buy to let mortgage as for their home mortgage will be disappointed, and potentially out of pocket.
Interest rates are traditionally higher with buy to let mortgages
Again, if your calculations for interest rates are based on your home mortgage, you may be in for a shock when it comes to arranging a buy to let mortgage. This is because the interest rates associated with a BTL mortgage are higher. Over time, you will pay more for this style of mortgage, so make sure you allocate enough funds in your budget.
You need a sizable deposit for a buy to let mortgage
If you plan on buying your own home, you need to save at least 5% for the deposit. Some lenders offer 100% mortgages, and of course, the bigger the deposit, the more attractive mortgage you will likely receive. However, it is not out of the question to work towards the goal of saving a 5% deposit when buying a home.
When it comes to arranging a BTL mortgage, you need to save a minimum of 25% of the property value. In some cases, a lender may request you provide 40% of the property value for the deposit. Therefore, you must have a higher level of savings to allow you to arrange a BTL mortgage.
Most buy to let mortgages are interest-only
With a lot of mortgages, you don’t pay to the asset each month, you pay the original loan in full at the end of the mortgage. It is vital you consider the implications of this, and make plans to ensure you have sufficient funds to pay off the mortgage at the time.
There are reasons why people should enter the BTL market, but it is crucial you make an informed decision. Ask for guidance and get help in looking for the best buy to let mortgage available to you. Call on an expert for help and make an informed decision.
