The government recently published the Renters Rights Bill to Parliament. Here are some of the proposed new rules :
• ban the practice of evicting tenants in England without a reason
• give tenants the right to request a pet (within reason)
• a ban on rental bidding wars
• legally publishing an asking rent for their property (and sticking to it)
• forcing landlords to fix issues like damp and mould
• ending blanket bans on tenants with children or those on benefits.
With this in mind, the Renter’s Reform will likely impact landlords. It’s worth asking if your investment will still serve you. We go into a few factors around a buy-to-let mortgage.
What is different about a buy-to-let mortgage?
If you plan to rent your home, you need a buy-to-let mortgage. A residential mortgage is if you are going to live in the property. Mortgage providers see buy-to-let mortgages as higher risk. This is because landlords often face problems with rent collection.
Consider this. How likely is your property to be constantly occupied?
There is a higher risk involved. So, you’ll need to pay a larger deposit for a buy-to-let mortgage. Usually, a minimum of 25% of the total value. However, some require a deposit as high as 40%. Other fees may be higher too.
Are repayments the same?
Here is a bonus. Many buy-to-let mortgages are interest-only. This means you’d only pay monthly interest payments. Rather than repayments on the loan itself. This results in lower monthly payments for buy-to-let mortgages.
However, the mortgage must be repaid in full at the end of the term. Many will pay for this by selling the property. But if house prices have fallen since the time you bought the property. You may struggle to repay the mortgage.
Who can get a buy-to-let mortgage?
Applying for a buy-to-let mortgage is not as easy. Generally, you must own a home yourself. Either outright or with an existing mortgage. Many lenders expect landlords to be earning at least £25,000 a year.
And most lenders set upper age limits. Usually at 70 or 75 years old. Mortgages tend to last for 25 years. So, you would normally need to be 45 years old or younger to secure a loan. But check with us, as this isn’t always the case.
Contact us today about securing a buy-to-let mortgage. Or if you are renting and want to buy your first property. We are here to help!
SPEAK TO AN ADVISER
Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. A fee may be charged for mortgage advice. The exact amount will depend on your circumstances. Some forms of Buy to Let mortgages are not regulated by the Financial Conduct Authority.