When looking to purchase a Buy-to-Let property there are many different areas to consider and to plan for. Buy-to-Let mortgages are designed to help you purchase a property with the view to rent it out. We have compiled a short guide to help you find out what is required in a buy to let property and also how you can get yourself a Buy to Let Mortgage.
Rental Income - One of the most important factors to consider when looking at a buy to let property is the amount of rental income the prospective property can generate. The majority of lenders require the property generate at least 125% of the monthly mortgage amount.
For Example: If the monthly mortgage payment is £500pcm, the monthly rental amount would need to be at least £625pcm. The amount you can borrow for a buy to let property is determined not only by the rental income, but also by the loan to value.
Loan to Value - Another factor to consider is the loan to value (LTV). This is the percentage calculation of borrowing against the property. The lowest deposit available in the market is around 15%, however competitive rates start around 25%. This percentage is the amount of deposit you will need to place on the property when making the purchase.
A large percentage of lenders will accept the following sources of deposit, these include;
- Equity Release – by remortgage an existing property, you can release equity to raise the money required.
- Further Advance – this can be done by increasing an existing mortgage from your current lender.
- Secured Loan – you can borrow money against an existing property.
- Unsecured Loan – you can get an un-secured personal loan.
- Savings – you can use existing savings to cover the deposit.
- Inheritance – you can use inheritance money.
- Family Gifted – a family member can donate/gift the money required.
