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Buy to let mortgages do not differ greatly to traditional homeowner mortgages, although there are some intricacies which are important to understand to ensure you find the very best deals to suit your specific circumstances. For the most part, the charges and fees which relate to buy to let mortgages do not differ; however, if you are new to buy to let investment it is important you are aware of a few key differences. Deposit / Equity: The LTV or loan-to value ratio you can borrow for a buy to let mortgage is generally lower than you would be able achieve from a traditional residential mortgage. That is to say, the amount of capital you will be able to borrow in comparison to the value of the property is less. Therefore, the likelihood for a buy to let investor is the requirement for a larger deposit; usually 20 per cent of the property’s value. Traditional homeowner mortgages will still allow individuals to borrow 90% of the property’s value, requiring just a 10 per cent deposit to be paid up front. Fees: The fees associated with buy to let mortgages are in general quite a lot higher than those for residential mortgages. Arrangement fees can equate to 3.5 per cent of the total amount. Interest rates: The perceptive amongst you are probably starting to see a pattern emerging. This trend of increased costs stretches to interest rates. For the most part the interest rates on buy to let mortgages tend to be higher than those you would expect on a regular homeowners mortgage. On a residential mortgage you can expect to pay in the region of 5 per cent in interest, whereas buy to let mortgages are likely to be closer to 6 per cent. Income assessment: All the similarities between traditional and buy to let mortgages stop here. The assessment criteria used to determine a property’s affordability differ greatly. Typically a buy to let mortgage is assessed as a percentage of rental income, which should equate to at least 125% of the mortgage repayments. Therefore, if the mortgage repayments on a property total £500 per month, then the lender will expect monthly rental income to total at least £625. If not, they will unlikely consider the buy to let mortgage to be viable. A crucial point to note is that the value of rental income will need to be assessed by the same surveyor who conducts the mortgage valuation. In some cases a lender may be concerned about under occupancy or rental arrears effecting a buy to let investor’s ability to repay the mortgage, in which case they require you to specify a minimum income level so they can rest assured that if all does not run smoothly with the property, there are adequate resources to fall back on to ensure the repayments are made. Best buy to let mortgage rates deals with some of the industry’s leading lenders. This ensures that they are able to access deals you would not be offered if you were to approach the lender independently.
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