If you are considering getting into the buy-to-let market for the first time as a landlord you will certainly need a significant sum of money to complete the purchase of the property you want to rent out. You will also need to pay for any works that may be required such as installing a new bathroom, fitted kitchen, redecorating and furnishing the rooms.
So, where is the money going to come from to buy the property? If you have liquid cash readily available then that is certainly cheaper than having to borrow the money but if not you may need to approach a bank or building society for a buy-to-let mortgage.
If you are in that situation, how easy is it to obtain a buy-to-let mortgage and what are some of the criteria?
Well, there are several major banks and building societies that offer such mortgages so it shouldn’t prove a burden in being able to source a lender. The difficult part can be in meeting the lender’s criteria that tend to be different to that of mortgages to purchase owner occupied properties.
For instance, how much you can borrow tends to be connected to your projected rental income in so much as the rental income should be quite higher than the mortgages repayments – as much as 20% to 30% more in some cases.
The deposit that you will need to put down towards the purchase is usually greater than a conventional mortgage with you having to contribute around at least 25% of the purchase price.
The interest rate that you will pay is likely to be higher than for a standard mortgage and the fees will probably be more.
The lender will want to know how you will keep up the repayments if the rental property is unoccupied for a period of time so will ask questions about your other income sources such as from being employed and what disposable income you have left each month having paid all your personal bills. They will also carry out a credit reference search on you.
Hopefully, the above proves useful when considering whether a buy-to-let property is for you. You may wish to seek advice from the likes of a mortgage broker who has expertise in the buy-to-let market before committing yourself.