It can be difficult to figure out how to buy to let in the United Kingdom. You might not know where to begin if you’re a first-time investor. Even for seasoned landlords, this process can be daunting, as the rules and regulations governing property rental are always changing.
If you’re thinking of becoming a landlord there are a few things you’ll need to consider before starting your journey. From mortgages and deposits to figuring out your monthly rent and return on investment, we’ve got you covered. After reading this blog you will be able to take your first steps into the property management industry.
What is Buy to Let?
A buy-to-let property is a property that was bought specifically to be rented out. The majority of buy-to-let properties will require a specific buy-to-let mortgage – a mortgage specifically created for purchasing property to let.
Not every rental property is purchased as a buy-to-let. Some landlords inherit or purchase a home to live in, but later opted to rent it out. In this instance, the landlord must inform their mortgage lender and move to a buy-to-let mortgage.
What Is The Maximum Amount I Can Borrow for a Buy-to-Let Property?
Most mortgage lenders will ask that your rental income by at least 25% to 45% higher than your monthly mortgage payments. This is sometimes referred to as ‘rental cover,’ and it ensures that you have enough money to pay your mortgage during any blank periods.
Your ability to borrow money is also determined by your income, affordability, and credit history. Your eligible borrowing amount may be reduced if you have some outstanding debts.
The loan-to-value (LTV) ratio, or how much you want to borrow in relation to the property’s value, is something to think about. Mortgages with an LTV of more than 75% are hard to come by — and normally require a large down payment.
How Much Does a Deposit For a Buy-to-Let Property Cost?
Deposits for buy-to-let mortgages are typically higher than those for a regular residential mortgage. Most lenders want a minimum of 20% to 25% down, with some requiring up to 40%.
There are buy-to-let mortgages available with lower down payments, but the interest and fees will be significantly higher.
How We Can Help
Congratulations! You’re now ready to take your first steps into the landlord and letting business. If you need help with delegating your landlord needs contact us at 0203 991 6179.