In the world of finance and mortgages, risk becomes a common factor no matter how good of a deal you’ve struck. This is true whether you’re a first-timer looking for the best deal or an experienced landlord looking to make more income out of what you have. For many lenders, perhaps the biggest risks have come with Buy to Let mortgages. It can be difficult to blame them as the most recent financial crisis in 2017 made it clear that they need to be more cautious in general.
That said, applying for Buy to Let mortgages now is all about looking for lenders who are willing to make risks. It’s understandable to have a few questions about mortgages – particularly Buy to Let because lenders aren’t as willing to go with lower rates as they have been in the past. Here are some of the most common Buy to Let mortgage questions answered:
How much deposit is needed in order to apply for a Buy to Let mortgage?
This is one of the most commonly asked questions, and this can vary wildly depending on how willing the lender is to take risks. For example, the most typical number you’ll see that a lender will ask for would be about a 25% deposit (of the purchase price). While this is rather high, this pales in comparison to what a lender might ask of you if the property you want to rent out has just been built as it raises the overall risk. For a just-built property you’re looking at upwards to a 35% deposit. This is the main reason why you need to be very careful when it comes to renting out a property in general.
Can I have more than one Buy to Let mortgage? If so, how many?
There have been plenty of instances where a landlord applied for a Buy to Let mortgage even though it was exceedingly clear that they already had other mortgages and would likely not be able to handle another. Whereas some lenders might have accepted this, it’s no longer the case now.
The average number you would be looking at would be about two to three Buy to Let mortgages for a single lender. This is actually rather generous because some lenders would even impose rules on your ability to apply for a Buy to Let from other lenders! As stated earlier, this depends wildly on the lender and just how willing they are to play the game of risk.
What do I need to consider before applying for a Buy to Let mortgage?
The main thing that you need to consider would be whether or not it’s worth it in the area of the property itself. The property rates determine the effectiveness of Buy to Let mortgages because not only can it raise the value, but it can also raise the rent as well. It’s also important to consider whether or not this property is newly built – because the deposit will be higher and some lenders will even outright refuse to help. The risk is simply too high that you’ll find lenders refusing just-built properties.
To conclude, Buy to Let mortgages and renting property in general can be quite a risk depending on a number of factors. However, it’s also important to consider that there are still an overwhelming number of individuals who rent out property anyway, because it’s an attractive prospect despite the risk. What matters now is whether or not you think renting out your property and taking a Buy to Let mortgage would be worth the risk.