It is all well and good having a buy to let mortgage explained, but how do you go about getting one?
Much like a regular mortgage, there are certain criteria you need to meet before you can set up a buy to let mortgage.
Generally, to get a buy to let mortgage you need to be purchasing a house or flat for investment purchases, and should have a good level of financial stability to be able to keep up with mortgage payments.
To give you a better idea of the criteria you need to meet before applying for a buy to let mortgage, here are some of the rules behind buy to let mortgages which you’ll need to know about.
You Should Already Own Your Own Home
To be able to use a buy to let mortgage for your investment, you need to already own your own home, whether this is through an outright payment or with the help of a residential mortgage.
For instance, you couldn’t take out a mortgage on an investment property while still renting or living elsewhere, as mortgage lenders may question whether you would then start living in the property yourself.
There’s also the fact that buy to let mortgage lenders tend to be cautious of first-time buyers as they consider this quite a risky option.
If you already own a residential home, you’ll be viewed as a lot more trustworthy and able to keep up with mortgage payments, helping you find more mortgage lenders to work with.
You Need to Earn a Certain Salary
To obtain a buy to let mortgage, you need to earn a salary of £25,000 or over.
This is usually the minimum income that a mortgage lender will accept before they let you use a buy to let mortgage to pay for your investment.
While some lenders will accept a lower personal income, you’re likely to have an easier time finding a mortgage lender if you earn at least £25,000 a year.
Age is also a factor to consider.
You need to be at least 25 to use a buy to let mortgage, but many lenders also require borrowers to be below a certain age.
Typically, you should be no older than 70 or 75 by the time your mortgage ends.
So, if you were to take out a 25-year mortgage, you would be 70 by the time the mortgage payments ended.
This can vary between different lenders, so it’s something that’s worth querying.
The Property Should Be Completed
When agreeing on a buy to let mortgage, you might find it more difficult to find a lender who will loan you the money for an off-plan property.
Off-plan developments are those which haven’t yet been completed.
Because the property isn’t yet a tangible and completed asset, a lot of mortgage lenders view off-plan investments as a risk, especially since the completion date can change.
If you’re thinking of buying an off-plan property, you should weigh up the benefits of this type of investment against the disadvantage of not using a buy to let mortgage.
For instance, off-plan investments are offered at below-market rates which means you have less to pay for the investment.
There’s also the benefit of added capital growth that you can often gain from an off-plan investment.